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What is an Administration?

Administration is a formal insolvency process designed to help companies facing financial difficulties gain valuable time and legal protection to try and steady the business.

It safeguards the business from creditor pressure and threats of winding-up action.

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How does the Administration process work?

Once a company is placed into administration it enters a moratorium period whereby it receives protection from creditors and landlords.

Legal action against the company cannot be started and any ongoing litigation is ceased. All assets of the business are also protected from bailiffs, hire purchase companies and asset-based lenders who cannot take possession of their property without administrator approval.

Appointed Insolvency Practitioners, who act as the company’s administrator have to assess the company’s financial position, operations, and overall viability.

Following their review they have to put a plan in place to move the company forward which may include selling the company out of administration or continuing to trade whilst implementing a restructuring plan.

Administration can only be entered into if it is deemed to be the best solution for all stakeholders.

The Insolvency Practitioners are required to state which one of the three statutory purposes of administration is behind their decision to place the company into administration.

If none are able to be met, administration cannot be recommended.

Statutory Purpose 1

Rescue the company as a going concern

Statutory Purpose 2

Achieve a better distribution to creditors than would be likely if the company were wound up

Statutory Purpose 3

Sell the assets and or property of the business in order to make a distribution to one or more secured or preferential creditors

Advantages

Legal action stops
Keeps the company’s financial situation from worsening
Continuity of the business can be protected
Insolvency Practitioners take over to protect creditors interests

Disadvantages

Directors lose control of the company
The process can be very costly due to the intense and active role of administrators
Negative publicity, administration is a very public procedure
The directors conduct will be heavily scrutinised
There are some limitations, such as not being able to shed excess staff costs due to TUPE laws

Can’t pay your CBILS or Bounce Back Loan?

You are not alone! We speak to directors on a daily basis who are struggling to keep up with repayments. Give us a call so we can discuss your options, free and confidentially.

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Yes – HMRC can absolutely chase a dissolved company. They have six years from the date of dissolution and twenty years if they believe and fraud or negligence has taken place.

Yes, you can. However, should your conduct as a director be called into question for the company you were a director of, you could be banned at a later stage.

No it will not. Being the director of a limited company limits the liability to the company. That is providing you have acted as any reasonable person would whilst running the business and not signed up to any personal guarantees or have an overdrawn directors loan account.

Please contact us at your earliest convenience. We can provide guidance on the Company’s ability to repay these amounts over time and assist in negotiating a suitable time-to-pay arrangement with HMRC on your behalf. Acting promptly increases the likelihood of HMRC providing assistance.

Fees vary depending on the level of work that needs to be undertaken and the level of specialism that needs to be given.

Disqualification under the Company Directors Disqualification Act bars former directors from holding director positions in UK-linked limited liability or overseas companies. They are also prohibited from involvement in setting up or managing such entities.

What is an Administration?

How does the Administration process work?

What are the advantages and disadvantages of Administration?

Frequently Asked Questions