HOW ADMINISTRATION WORKS
Companies and partnerships in the UK can use Administration as a fast legal process to protect a business from creditor action and give breathing space to find a solution.
Administration stops all legal and creditor action.
It stops the company being wound up
It stops secured creditors removing their assets
Getting into Administration usually takes between one and five days
The choice of Administrator is usually a board of directors’ decision. However, once a company is in Administration it is the Administrator who runs the business (usually with the help of the directors or management team). It is worth noting that the directors’ powers cease on Administration although they still have to cooperate and assist the appointed Administrator.
It is normal before going into Administration to have a plan or strategy for the likely outcome of Administration.
The Administrator has to make a report to creditors (called the ‘proposals’) within eight weeks of appointment. There is then an interim report at six months and annual reports as well as a final report on closure. Administration usually lasts for up to one year but can be extended for a longer period.
The process of getting a company into Administration has a few routes including:
The directors have a board meeting and decide by a vote of a simple majority on placing the company into Administration. They will need to choose a Licensed Insolvency Practitioner firm (or change to licensed insolvency practitioners) like ours to act as Administrators. The forms will be filed in Court and the company usually goes into Administration when we deal with all this paperwork for you.
BANKS OR LENDER DECISION
Where a bank or lender has a fixed and floating charge, they can appoint an Administrator of their choice. They will usually do this with some notice following a review of the business and the default on loan repayments or banking covenants by the borrower. Banks prefer to get the directors to sign off and approve the banks choice of Administrator to avoid a dispute at a later date.
- Administration protects a business and stops all creditor action.
- It can take just one day to get into Administration, so is very fast.
- The Administrator is normally chosen by the directors.
- We do all the paperwork for you.
David Kirk did exactly what he said he would. I’d be lost without Administration. Without David, we would have gone bankrupt by now. Really good