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COMPANY ADMINISTRATION

Inquesta specialises in turning around a financial crisis and ensuring that a business comes out of administration able to continue to trade and grow.

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What is Administration of a Company?

Company administration occurs when a business is faced with serious cash flow issues, and the threat of insolvency is inevitable. An administrator is appointed, who must attempt to balance helping the business run more effectively to promote a healthier future, while ensuring that all creditors are paid what they are owed.

Administration in business can represent an opportunity for a company to attempt to regain some semblance of control of their own financial situation. This is done by gaining some clear space to take stock of their operation, assess any wrongdoings, and work out how best to repay creditors —
without them breathing down their necks.

Going into administration means your company is effectively taken under the management of an independent administrator — known as an insolvency practitioner (IP). They will act on behalf of the creditors to ensure that they receive the money owed, while considering whether the business has the possibility to successfully trade in the future. This will be done by assessing the viability of restructuring company operations or shifting focus to other aspects of the firm to promote future success. However, it is possible that the issues plaguing the company could be deemed too much to overcome, and it will need to be liquidated.

The process of administration is set out within The Insolvency Act 1968 and aims to put an official moratorium on all legal proceedings a business might be facing. For administration to be sanctioned by the court, a judge must feel that it is a correct and justifiable course of action, and represents the best opportunity for the company’s creditors to receive the money owed to them.

The act of going into administration can be intimidating for business owners. For some, it has a reputation for being the final straw for a dying company. In reality, this is a misconception due to the severity of the situation that many firms who enter administration have found themselves in. If executed correctly at the optimal time, administration can be the saving grace for your business when it needs it most.

How an Insolvency Practitioner Helps a Company Going into Administration

Once appointed, the company administrator will completely take over the running and management of the business. They will make all the key decisions on how the firm will operate going forward while in administration. Directors lose their powers upon the appointment of an administrator, and do not regain them until the administration period is over.

The administrator primarily holds a duty to the creditors, to ensure that they are repaid everything they are owed.

However, the administrator is also committed to restructuring the company’s operation to increase efficiency and long-term sustainability.

The Responsibilities of an Insolvency Practitioner Towards Companies Entering Administration

An insolvency practitioner has several vital responsibilities to any company entering administration. These often include:

  • Always acting in a fair and honourable manner throughout the administration process
  • Saving the business as a going concern
  • Obtaining a more beneficial result for creditors than the business liquidating would provide
  • Realising company assets to make a distribution to secured/preferential creditors
  • Always exercise reasonable caution to obtain the best possible price for any company assets sold off.

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The Company Administration Process

Once appointed as administrator, an insolvency practitioner will make attempts to save the business, while formulating a plan to repay creditors. The company administration process will be different for every firm. While the steps may vary, aspects such as the statement of affairs, administrator evaluation, and administrator proposals will act as a general guideline that many cases will follow.

Notice of Intention (NOI)

A notice of intention (NOI) is a declaration by a business that they intend to appoint an administrator to repay creditors and rescue it from liquidation.

The notice is filed at court by any of the following:

  • Company director
  • The company itself
  • A floating charge holder (generally the bank)

The aim of a NOI is to afford businesses the breathing room they need. If there is a floating charge registered against the company, a debt moratorium will also be set up that lasts for 10 days. During this time, business owners will be able to take stock of their situation without the fear of impending creditor action.

Official Appointment

Once the initial notice period has expired, or once the charge holders have agreed to the change to the situation, a notice of appointment will be filed in court and the business will be placed into administration.

Statement of Affairs

Once administration is confirmed, the statement of affairs is needed. This is a critical document required by the administrator that provides them with details surrounding company assets and liabilities, as well as any fixed or floating charges.

Once the statement of affairs is completed, it should be signed off, and a copy must be provided to Companies House.

Evaluation and Proposals

During administration, the administrator has up to eight weeks in order to assess the company’s financial situation, to put together a clear plan of how they intend to repay the creditors. This plan is then provided to creditors in an official proposal, which should include the following:

  • A copy of the statement of affair
  • The outlined plan for repaying the owed debt
  • All fees charged by the administrator
  • The proposed exit strategy
  • Expected outcome of the administration

Continued Management

If the proposals are accepted by the creditors, the administration process will begin. The company administrator will manage the business following guidelines set out in their proposal, continuing to provide creditors and the court regular updates.

End of Administration

The standard term for administration is limited to 12 months. Should more time be needed to complete the process, this can be extended by way of a court order or an application by the administrators themselves. An agreement may also be required from both secured and unsecured creditors.

How Inquesta can Assist Companies Facing Administration

If your business is facing administration, Inquesta possesses an expert team with all of the knowledge and expertise needed to review the problem and assist you in devising a solution that works for you and your creditors, to attempt to build a brighter future.

Our specialists will work with you to turn around a financial crisis, giving your company the best possible chance of recovery and potentially growing for years to come.

Inquesta strives to always have the best interests of our clients as the number one priority in every single thing we do — meaning that no matter what you come to us with, you are guaranteed a personal, unmatched level of care.

When it comes to administration, our main goals are to ensure that your creditors are repaid and your company is saved. No matter the situation, the specialist team at Inquesta can help guide you through the entire process.

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Our Specialist Team

Inquesta has amassed a dedicated team that are here to assist you throughout the administration process.

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Steven Wiseglass

Director of Insolvency

A co-founder of Inquesta, Steven is a licensed Insolvency Practitioner with over a decade of experience in the field. He is a member of the Insolvency Practitioners Association, Association of Business Recovery Professionals (R3), and his insolvency licence is issued by the Insolvency Practitioners Association. In addition, he sits on the R3 committee of the North West Regional Committee.

Steven specialises in advising directors of small to medium-sized businesses, and has a wealth of expertise in providing the most appropriate advice whatever the firm’s circumstances may be. He has also been instrumental in helping company directors save their business and rebuild them into successful enterprises.

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FAQs

Administration is the act of bringing a third party to attempt to repay any business debt, while rescuing the company and restructuring it to be more efficient and sustainable for the future. Alternatively, liquidation is the process of winding up a company by utilising and realising company assets to repay debt.

In most cases administration will last for up to one year. However, it could be worthwhile to note that it is possible, in some circumstances, for a company administration to continue past this period. In special circumstances, if the company can prove that an extension is necessary, the court can allow for additional time.

When a company goes into liquidation, all assets are distributed to creditors in order to repay business debts. There is an order of priority for these assets, which goes as follows:

  1. Costs/expenses related to the fixed charge
  2. Fixed charge creditors
  3. Costs/expenses of the administration process
  4. Preferential creditors
  5. Floating charge creditors
  6. Unsecured creditors
  7. Shareholders

Administration is a process exclusively for businesses suffering from serious financial trouble. As a result, despite the best efforts of the administrator, some cannot be rescued. But just because a company enters administration doesn’t mean that they will go out of business. Administration is intended to help companies to restructure, to promote a more sustainable and efficient working future.

One of the key plus points of administration is that a company is able to trade while in administration, to trade their way out of debt. However, since the administrator resumes full control over the operation of the business throughout the administration period, company directors will no longer be responsible for managing the trading until the administration period is complete.

During administration an administrator will be appointed with the express aim of assessing operations and making important decisions surrounding company assets and finances. One of these decisions will surround employees. It is possible during the administration that some employees could be laid off, and some payments could be in arrears. However, the process should include some provisions to pay employees.

Once a business enters administration there is a 14-day period for administrators to weigh up if any employees are deemed non-essential and need to be dismissed. Regardless of if they are kept on or let go, the administrator must pay employees where possible.

Employees dismissed will become ordinary creditors, meaning they will get a share of the company’s assets to repay any lost wages or severance fees should there be any left.

Also in Company Insolvency & Recovery

Business Recovery

Company Voluntary Arrangement

Liquidation

Receivership

Solvent Winding Up

Statutory Demand

Winding Up Petition

Bounce Back Loans

Court Bailiff Action

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