One company in a group going into administration
HOW ONE COMPANY GOING INTO ADMINISTRATION WORKS
Not every company in a group may need to go into Administration. For example, the group may have formed a holding company some time ago to own the main assets of the business such as freehold or intellectual property but used a subsidiary to carry out the day-to-day trading. Often the employees are in the subsidiary as is the end customer.
If a subsidiary has got into financial trouble but the holding company is solvent, it is possible to just put one or more subsidiary companies in the group into Administration
It is also possible for another group company to buy back the assets of the subsidiary – provided certain rules and procedures are followed about marketing and the valuation of assets
If the subsidiary owes money to the holding company this should not be paid back before other creditors especially in the period prior to Administration when the directors know the business is insolvent
If this is repaid the directors may be prosecuted by the Insolvency Service and asked to pay the funds back by the Administrator
It is normal to have inter group balances between companies. If money is owed to the subsidiary by a solvent group company it is expected that these balances will be paid and cleared subject to the right of set off.
The use of subsidiaries will almost certainly be the case where the business operates internationally in different jurisdictions and usually a new company is created for each local territory.
DO YOU OWN A UK BASED SUBSIDIARY?
If you are an international company with a UK subsidiary in financial trouble we can help you, step by step, through the process of Administration.
We will produce all the paperwork needed to put a subsidiary into Administration and we will arrange for the closure of the business and redundancy of all staff (if needed). We can also help if the business is to be sold to a new owner as a going concern.
We will ensure all assets are independently valued before sale by our approved and insured agents.
- There is nothing to stop just one company in a Group going into Administration.
- Be careful of intercompany balances which may have to be repaid.
- A group company can buy back the assets as long as they follow the reporting and disclosure rules.
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