Administration
The principal aim of the Administration process is to rescue a company in financial difficulty.
There are both benefits and drawbacks to Administration, and here at Gibson Booth we will advise you of the best course of action and prepare all the necessary paperwork.
When is Administration appropriate?
Typically, Administration might be an appropriate solution for companies that have:
- suffered cashflow problems due to bad debtors
- suffered short term trading issues
- undergone significant refinancing or restructuring and come under pressure from creditors
- begun the process of selling the company and the directors wish to ensure transparency in the sale.
- identified a prospective buyer of the company which has concerns about transacting with an insolvent company.
Depending on the purpose of the Administration, the process may only take a few months, although it is envisaged in the legislation that an Administration will last for up to a year (this period can be extended.)
Appointing an Administrator
The Administration process can be implemented by the company, its directors, or by any creditor who holds what is called a “qualifying floating charge” over the company.
An Insolvency Practitioner (IP) will act as the Administrator of the company. The company, or its directors can nominate this IP, but if a creditor holds a qualifying floating charge, they have the final decision on the appointment.
Recent changes in the law mean that the involvement of the Court is normally no longer required, although a Court process remains available in certain circumstances. The IP is however a properly appointed officer of the Court and his or her duty is to act according to the interests of the relevant stakeholder groups.
Duties of the Administrator
The Administrator must establish the following, in order of priority:
1) if the company can be rescued as a going concern
2) if a better outcome for the creditors than a winding-up of the company can be achieved
3) if property can be realised, in order to make a distribution to secured and preferential creditors.
How we can help
Gibson Booth are available to discuss and help with any issues throughout the Administration process, and to work with the directors, shareholders and any qualifying floating charge holder. We can also work with the key members of the company to formulate a rescue or turnaround solution.
Please call Ted Wetton on 01226 215999 if you are the director or shareholder of a company and would like advice or to discuss any matters raised, or ask your company’s existing professional advisors to contact us.
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