Absolute Recovery Limited
 
 
 
ADMINISTRATION
 

What is an Administration?

    The purpose of Administration
       

Administration is a procedure which protects the Company against Creditor action whilst a solution can be found. This is normally a temporary measure whilst an Insolvency Practitioner takes responsibility for the day-to-day running of the business. they will try to save the business, or part of it, and prevent any further deterioration in the Company’s financial position.

 


 


The Administrator of a Company must perform his functions with the objective of—

(a) rescuing the company as a going concern, or

(b) achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration), or

{c) realising property in order to make a distribution to one or more secured or preferential creditors.

Some of the benefits of the process are:
 

Entering Administration brings a halt to any legal proceedings brought against a company.

The prevention of further decline of the financial position of a company. This not only gives protection for the core business but reduces the risk of directors opening themselves up to a potential wrongful trading action.

Administrators must be licensed insolvency practitioners and as such are heavily regulated. Their conduct and any actions taken by them are dictated by a strict code of conduct.

The Administrator is duty-bound to work for the benefit of all creditors (including unsecured).

The restructuring of the company is an option. The Administrator has the opportunity to dispose of non-profitable parts of the business and sell the valuable parts of the company. Therefore, the business may continue trading and maintain employment for the employees. On occasion, it is necessary for jobs to be made redundant, to ensure the commercial viability of the company.

Where the company cannot afford to pay employees redundancy payments, claims can be submitted to the National Insurance Fund. This is a government fund managed by The Redundancy Payments Service.

 

 

 

 

   
The disadvantages of the process are:
 

Entering Administration means directors have to relinquish control of their Company. They may face redundancy through the sale of the business to a 3rd party.

The selling off of Company assets to third parties.

After instigating, Administration is a process that becomes publicly available information. Most notably, the informing of Creditors and any correspondence including the Company website, emails and purchase orders must state the Company is in Administration.

During the life of Administration, the raising of all purchase orders must go through the approval of the Administrator.

There must be an advertisement of the appointment of an Administrator in the London Gazette and local/national newspaper.

Any Creditor holding a qualifying floating charge (often a factoring Company or bank) can appoint an Administrator of their choosing.

The costs associated with Administration can be high and escalate very quickly if trading the Company.

All the business and assets may be sold to the current owners/directors or a 3rd party. In this case, the current employees may transfer to another entity under TUPE (transfer of undertaking) laws.

This can cause problems especially if the Company needs to cut employment costs to ensure future survival

 

 

 
 TIMESCALE FOR AN ADMINISTRATION
 

The Administration process continues for up to one year. However, it can take far less time depending on the particular circumstances in a given situation. There is scope for the process to last longer. This requires the consent of the courts and/or the creditors involved. It is the Administrator’s responsibility to conclude the Administration as quickly as is reasonably possible. The Administrator has an eight-week limit to draft proposals. The proposals are effectively a plan of action. The Administrator needs to distribute proposals to creditors and seek creditor approval. The granting of an extension of the eight-week time-frame comes from court and/or creditors.

 
If you think this may be a solution for your business needs, speak to one of our consultants today for a confidential consultation with no obligation.
 

 

 

 
Absolute Recovery Limited
1st floor, Block A
Loversall Court
Clayfields
Tickhill Road
Doncaster
DN4 8QG
 
 
Tel: 01302 572701
 
 
Absolute Recovery Limited, Registered No. 7966220

 

 

 

 

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