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How to place a company into Administration

Who can put a company into Administration and what is the process?

If your company is struggling financially and facing intense levels of creditor pressure, one route you can take is to put it into Administration. Entering into Administration will protect the company from creditor legal action and give your appointed administrator the time and space they need to create a restructuring plan that rescues viable elements of the business.

However, placing a company into Administration can be a complicated process and it’s not something to take lightly. In this article, we’ll explain when you can put a company into Administration, how you do it and what the process looks like. 

What is Company Administration?

Company Administration is a formal insolvency procedure that protects an insolvent business from its creditors while an Insolvency Practitioner (IP) formulates a plan to restructure or sell it. 

Acting as the administrator, the IP will take control of the company with the primary aim of rescuing the business as a going concern. If they cannot do that, they will try to achieve a better result for the company’s creditors than if it had entered liquidation.

Who can put a company into Administration?

Two parties can put a company into Administration. It can either be the directors/shareholders of the company or a secured creditor that holds a qualifying floating charge. In practice, that’s usually the bank.  

As a director, if you put your company into Administration, you can choose the Insolvency Practitioner who will act as the administrator. If a creditor puts you into Administration, the court will usually appoint the creditor’s preferred IP to take control of the company and manage the procedure.  

When can you put a company into Administration?

Administration is not a suitable procedure for every struggling company. For it to be appropriate, your business must be:

  • insolvent but still have a significant value or number of assets; and
  • facing significant and consistent creditor pressure with a real threat of legal action, such as bailiffs or a Winding Up Petition.

If your business has few assets in number or value and no realistic prospect of making a recovery, a Creditors’ Voluntary Liquidation (CVL) is likely to be the best option. On the other hand, if you feel that your business model is fundamentally sound but the company’s debts are holding you back, a Company Voluntary Arrangement (CVA) could be more suitable. 

How to put a company into Administration

The first step is to contact a licensed Insolvency Practitioner like the team at Begbies Traynor to discuss whether Administration is appropriate for your business. We will assess your company’s financial position and discuss all your options with you before guiding you through the process.  

Appoint an administrator

You will need to call a meeting of the directors or shareholders to resolve to appoint an administrator and sign the relevant paperwork. If you have a qualifying floating charge holder, you must also file a Notice of Intention to Appoint an Administrator and send them a copy in written form. After five working days, you can file a Notice of the Appointment of an Administrator with the court. 

From that point, you have 10 business days to appoint an administrator. The directors or shareholders can appoint their chosen Insolvency Practitioner. A floating charge holder can object to your choice of administrator and appoint their own, but this rarely happens if a clear plan is in place. 

The eight-week moratorium

Once you have appointed an administrator, an eight-week moratorium period begins which protects the company from creditor legal action. During this time, the administrator will assess the company’s financial position and create a plan to achieve one of the statutory aims of the Administration process. 

They’ll then send their proposal to the company’s creditors along with a Statement of Affairs, which one of the directors will produce. It will provide details of the company’s assets and liabilities, including any assets that are subject to fixed and floating charges. There will also be an invitation to attend an initial creditors’ meeting where the creditors will vote on whether to accept the proposals.   

The creditors’ meeting

The creditors must be given two weeks’ notice of the meeting and it must take place within 10 weeks of the date the company entered Administration. There’s no longer a requirement to hold an in-person creditors’ meeting. Instead, the meeting can be carried out via correspondence, although the creditors can still call a physical meeting if 10% (by the value of their claims) demand one. 

The creditors will be asked whether they accept or reject the proposals. They can also ask for amendments. If the creditors reject the administrator’s proposals, the administrator must report this to the court. The court can then choose to make several orders, including that the administrator’s appointment ends. On the other hand, if 50% of voting creditors accept the proposals in their original or revised form, the period of Administration will begin.

The Administration begins

The administrator will now take control of the company’s affairs, business and assets with the aim of achieving the outcome outlined in their proposals. They must send six monthly progress reports to the creditors, the court and the registrar of companies. They should include full details of their progress and information about the money they have received and paid out.

When does Company Administration end?

Company Administration ends when the administrator has implemented the steps outlined in their proposals and achieved their goals. That will usually take several months. The period of Administration automatically ends after 12 months, although that can be extended by the court if the administrator can show it’s in the best interests of the company’s creditors. 

Need advice?

Company Administration could be an appropriate business rescue procedure if your company is insolvent and under severe creditor pressure, but you need to act quickly. Contact our licensed Insolvency Practitioners for a free, same-day consultation or arrange a meeting at one of our offices throughout the UK. We’ll discuss your circumstances and advise you on your options. We can also manage the procedure on your behalf.

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