A formal insolvency solution to rescue a company in Administration.

A formal insolvency solution to rescue a company in Administration.

Administration places the company under the control of an Insolvency Practitioner providing the company with protection from its creditors as during the period of the administration creditors are not allowed to take any legal action against the company.

The administration is in place for a company that is struggling financially but has the potential to become viable again and can only be used if one of the following three statutory purposes exist

  • Rescuing the company as a going concern, or
  • Achieving better results for the company’s creditors as a whole than would be possible if the company were wound up without first being in administration, or if the administrator thinks neither of these objectives is reasonably practicable
  • Realising property and assets to make a distribution to one or more secured or preferential creditors

Administration provides the opportunity to restructure a company where possible as directors’ powers cease and the Administrator takes control of the business. It may be that there are inefficiencies within the business that can be removed as part of the restructuring.

Some administrations are known as “pre-packs” which is when an agreement to sell part or all of the business has been agreed upon before the Administrator is appointed. There are strict rules in place surrounding Pre-packs and certain procedures that have to be followed to ensure that a director is above criticism and specialist advice is required before starting on this course of action.

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