Alternative options to Administration

I am often asked to put a company into Administration by the directors when in fact, when going through the options, a liquidation can be simpler and cheaper.

Liquidation

One of the main reasons to liquidate over Administration is that there is no SIP16 pre-pack Administration reporting requirements and no need to use a business Evaluator. There are also less disclosure requirements on selling assets to third parties or back to the directors. The rules for disclosing asset sales are covered by Statement of Insolvency Practitioner (”SIP”) 13. You can find the latest copies of SIP 13 or SIP 16 by searching the website www.r3.org.uk.

In addition, the rules on TUPE do not apply in a liquidation so staff are not automatically transferred to the new company as they are in Administration.  TUPE stands for Transfer of Undertakings (Protection of Employment).

Employees made redundant by liquidation can claim their arrears of wages, redundancy, and other claims from the UK Government Redundancy Payments Service. We help process these claims.

Liquidation costs tend to be lower than Administration.

Company Voluntary Arrangements (CVAs)

This can be a useful process when you want to retain a limited company and your creditors are likely to agree to deferred and/or reduced payment terms perhaps over five years. They have been widely used by retail chains to vary the terms of shop leases.

Compulsory Liquidation

This is where the directors (or creditors) make an application to Court to wind up the company. It is a slow process and can take up to three months. It is not suitable for a company that has unpaid employees or assets to realise. 

Informal

If you can recognise the financial situation is deteriorating early on then you can look to try and agree a time to pay with creditors and try and avoid a formal insolvency procedure. This may also include a group company making a loan into the business to help keep it going.

Striking off

This can only be used by small, dormant companies. The instructions of how to do this are laid out on form DS01. It is a high-risk method of striking a company off if you have creditors.

EXECUTIVE SUMMARY

  • Consider the best way to close or sell the business as it may not be Administration.
  • Administration is usually the more expensive process.
  • If you do not know what to do, take early professional advice on your options.

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

Sophie M