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What is Administration?

Posted on by Recovery & Turnaround

Administration is a legal concept which refers to a situation in which, rather than going into liquidation, a company is operated by a newly-appointed administrator on behalf of creditors in an attempt to save the business from liquidation through a number of means.

There are various options that could be taken by administrators to stop a company from going into liquidation. The possible actions to take may not work in every situation, which is why it is important to have an experienced practitioner onboard to make the crucial decision of which one(s) would work best for your company’s individual situation. Possible actions to take could include:

  • Recapitalising the business
  • Selling the business to new owners
  • Demerging the company into elements to be sold, with the remainder being closed

The administrator will be a licensed insolvency practitioner, whose job is vital to the potential survival of the company, which is why they must act in a certain way. When an administrator is appointed, all legal action surrounding the company is ceased.

Pen & Calculator

The administrator, however, must not only work quickly and efficiently, but in a way that takes into account the interest of the creditors as a whole. This, afterall, is the objective of their role in stepping in to sort out the situation; to best help the creditors in ensuring they do not lose large amounts of money through the failure of the business in question.

By working on their administration proposals and endeavouring – eventually – to hand control of the company back to its board, the administrator is vital to the company’s survival.

Pre-Pack Administration

Pre-pack administration – a topic covered more in next month’s blog – refers to the pre-arranged sale of the assets belonging to a now insolvent company to a third-party, sometimes even the company’s own directors, after the company has gone into administration.

Why Opt For Administration

The prime reason for businesses to go into administration is, essentially, to get protection from creditors. Though an expensive process due to the hire of an administrator and one that temporarily halts the power of directors, the administration process is certainly a powerful tool for companies that may find themselves in this predicament and subsequently require such action.

Here at Recovery and Turnaround, we can aid you and your company during all stages of the administration process. We are committed to helping customers in the event of any financial issues or requirements they or their company may have.

The hostile appointment of an administrator is often a last resort of a secured creditor when they feel that all other avenues have been explored – albeit administration is often an important tool in a business recovery, it is extremely important for experienced eyes to manage the process and ensure that the directors’ interests are considered since the administrators duties lie solely to creditors.

To find out more about our range of services, get in touch with our friendly team today and let us keep your finances regulated and in good order at all times.

 

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