Administration is a powerful tool as long as the conditions are right. It is subject to clear preferential guidelines and we would have to ensure that it would be the best solution to take for all parties involved.
Administration is an insolvency process that provides a legal stay against creditor action and is designed to help struggling but potentially viable companies. If your company is in debt and being pressured by creditors, or, for example, is being threatened with legal action – maybe even a winding up petition – seeking the protection of Administration could halt any action being taken against the business.
Although Administration and Pre-Pack Administration are governed by the same best practice requirements, the pre-pack process differs in one key area – the sale of the business and any assets of the company is negotiated before the appointment of Administrators and completes either immediately upon – or shortly following – the appointment. This differs from the standard process where Administrators commence marketing of the business after their appointment.
The key plus-points of Administration are the continuation of trade by transferring any existing business to a newly set-up company, and the migration of employees to the new company as part of the sale – thus preserving jobs.
Administration – Key Points
Administration is a recommended solution where:
- Cash-flow pressures are intense but there is still a good business to preserve
- There is a need to quickly sell on the business of a technically insolvent company
- It simply isn’t possible to persuade creditors to agree out of court or through consensual means to an alternative course of action (such as a compromise or restructuring)
- Agreement is not possible within a manageable time-scale. For example, negotiations with the majority creditors may be proceeding well, whilst minority creditors are pursuing the company through legal process that threatens to bring the company down prematurely
- The company is insolvent and the directors are concerned about the risks of wrongful trading
In these circumstances it may be advisable to place the company in Administration - a legal process that requires the appointment of a licensed insolvency practitioner as Administrator. Begbies Traynor are licensed insolvency practitioners and can accept appointment as Administrators.
In conclusion, the Administration process is a powerful and useful tool as long as the conditions are right. It is subject to clear guidelines and we, as licensed insolvency practitioners, would need to ensure that it is the best solution for all parties involved.