A formal insolvency procedure that allows a financially distressed company or limited liability partnership (LLP) to restructure, recover, or liquidate assets under the protection of an appointed administrator.
How Company Administration Works
The process involves:
Appointment of an Administrator An insolvency practitioner is appointed to take control of the company, assess its financial position, and determine the best course of action.
Moratorium on Legal Action Once a company enters administration, creditors are temporarily prevented from taking legal action, allowing time for restructuring.
Business Viability Assessment The administrator evaluates the company's assets, liabilities, and operational structure to determine if it can continue trading or should be sold.
Potential Sale or Refinancing If viable, the company may be sold as a going concern, restructured for long-term sustainability, or refinanced to regain financial stability.
Exit from Administration Once a recovery plan is in place, the business may exit administration through a Company Voluntary Arrangement (CVA), sale, or liquidation if recovery is not possible.
Benefits of Company Administration
Business Rescue Provides an opportunity to restructure and recover rather than face liquidation.
Debt Management Allows for negotiations with creditors to reduce debt burdens and establish manageable repayment plans.
Legal Protection Places a moratorium on legal proceedings, giving the company breathing space to reorganise.
Continuity of Trade Ensures that operations can continue while a recovery plan is developed and implemented.
Preservation of Jobs Helps to maintain employment by preventing immediate business closure.
Maximising Returns for Creditors Provides a structured approach to repaying creditors in a way that maximises their returns compared to insolvency.
Why choose Company Administration?
During administration, the company may aim to:
- Continue Trading and restructure to allow part or all of the business to survive as a going concern.
- Improve cash flow difficulties or operational inefficiencies.
- Achieve a better result for creditors compared to immediate liquidation
- Dispose of assets to distribute proceeds to secured or preferential creditors.
Administration vs. Liquidation
Administration Protects the company while assessing recovery or restructuring
Members Voluntary Liquidation A process used to wind up a solvent company, ensuring all debts are paid before distributing remaining assets to shareholders. Read about MVL
Partner Voluntary Arrangement Allowing partners to formally close the business and distribute its assets in an orderly manner. Read about PVA