The time taken for a company to enter administration can be as little as a day, or in more complex circumstances, a couple of weeks. This is the period when the company declares insolvency, and a licensed insolvency practitioner (IP) is appointed as administrator. The ensuing procedure can continue for up to a year, but may be extended with agreement from the court.
Begbies Traynor specialise in corporate rescue and recovery, and are available for appointment as administrator.
Once the administration process is underway, the office-holder has eight weeks in which to present proposals for the company’s future to creditors. This is known as the ‘moratorium period’ and allows plans to be made without the fear of legal action being taken against the company.
During this time, the administrator must aim to achieve one of three outcomes:
The administrator prepares a report for creditors explaining the circumstances which led up to the company’s insolvency, their intentions with regard to exiting administration, and the approximate timescale in which this will happen.
Administration ends when one of the previously-mentioned objectives has been met, or the office-holder’s contract comes to an end. The contract can be renewed, however, with authorisation from the court.
So are there any circumstances in which the duration of administration might be shorter than average?
This official insolvency procedure involves the speedy sale of the company, which is generally marketed before the administrator is appointed. Once the IP is in office, the company’s underlying assets are sold to third party or trade buyers, and sometimes to the existing directors. This short period in administration allows the new company to start up quickly, and potentially avoid the bad publicity that could damage the success of their initial trading period.
If a company owns few assets, and the options going forward are limited, a decision might be arrived at and implemented quickly by the administrator. This is essentially the result of having few options available.
Company dissolution may be an option for the administrator, and in some cases could help to avoid the lengthier process of liquidation – if the company has no assets with which to repay creditors, for example, and the administrator is satisfied that no wrongdoing has taken place on the part of the company’s directors.
Conversely, in some instances liquidation could be a time and money-saving option - if only a few assets exist, for example, and the company’s affairs are uncomplicated.
In more complex cases, administration can be particularly lengthy. If 12 months have passed and the administrator’s contract has ended, the process can be extended with consent from the court, usually at further six-month intervals.
A number of situations could result in a lengthier administration process, and the need to extend its term. These include if:
A shorter extension to an administrator’s contract may suffice in less complicated scenarios - they might simply require more time to realise assets, or complete their affairs before administration ends.
If you fear your company is close to insolvency, and you would like more information on company administration and other insolvency processes, Begbies Traynor can help. We’ll provide professional advice tailored to your company, and ensure you understand all your options. We operate from over 50 offices around the country - call one of our expert team for a free same-day consultation.