We advise both insolvency practitioners and company directors on the benefits and protection offered to financially distressed companies by the administration procedure.
The streamlined, out of court, procedure can provide an extremely fast and cost effective method of preventing creditors from taking hostile action against the company, to provide a breathing space to the directors to explore the alternative options available to save the business for the benefit of all its stakeholders.
Administration is a procedure designed to promote the rescue or reorganisation of a Company or its business.
The procedure of placing a company into administration has been greatly simplified since the coming into force of the Enterprise Act 2002, which enables an administrator to be appointed in the majority of cases via an out of court procedure by either the directors, the company itself or the holder of a qualifying floating charge.
The objectives of an administration are enshrined in statute and are set out in order of priority. The primary objective is to rescue the company as a going concern. Only if a rescue is not achievable will an administrator then look to the alternatives, being either to achieve a better result for the company's creditors as a whole than would be likely in the event of an insolvent liquidation, or else to realise property for the benefit of secured or preferential creditors.
One major advantage of an administration is the protection offered to the Company from its creditors by virtue of a statutory moratorium, providing often vital breathing space to the Company to enable it to address its financial difficulties without the potential threat of creditor action. Often a company will be enabled by virtue of such moratorium to negotiate a sale of its business in circumstances where it would otherwise have been forced into an insolvent liquidation, ideally enabling the rescue of that business and continuity of service with customers and suppliers.
The administration is designed to last for a period of one year, although this can be extended by application to the court, or else brought to an end prematurely in the event the objectives have either been achieved, or are shown to be unachievable. A company may be dissolved directly following administration, although the more usual exit route is via a creditors' voluntary liquidation.
Our Corporate Recovery team of solicitors has considerable experience of placing companies into administration, and dealing with the rescue of businesses as going concerns, sometimes by the sale back to the existing owners or directors. We also advise insolvency practitioners, creditors, landlords, and other stakeholders on the implications of administration and the most effective actions to be taken to protect their positions.
Corporate recovery solicitors
To arrange a discussion with a corporate recovery solicitor click here or call us on 0800 840 4929.
