Administration is concerned with the restructuring and rescuing of insolvent companies.
It is available to companies registered in the United Kingdom under the Companies Act 2006, as well as to partnerships and limited liability partnerships.
If you have any further questions in respect of administration, or if you think that administration is a suitable option for you and your company, please contact Angus Ashman, Partner and Head of Dispute Resolution.
How do I know if my company is insolvent?
A company is insolvent if its debts and liabilities outweigh its assets.
Under the Insolvency Act 1986, which takes effect when we a company becomes insolvent, the phrase ‘unable to pay its debts’ is commonly used.
1. When a company has not paid a sum owed to a creditor that exceeds £750 within 3 weeks of having been served with a written demand in the statutory form (known as statutory demand); &
2. When it is proven to the satisfaction of the court that the value of the company’s assets are less than its liabilities, taking into account contingent and prospective liabilities.
How do I put my company in administration?
A company can enter administration in one of two ways:
1. By making an application to the court; or
2. By filing the prescribed documents at court. This is often the cheapest route and it takes less time. It can also be done by a company itself, its directors or the holder of a qualifying floating charge.
What happens when my company enters administration?
An administrator is appointed to take control of the company.
The administrator must attempt to achieve one of the statutory purposes outlined in the Insolvency Act 1986.
1. The rescue of a company as a going concern;
2. The achievement of a better result for the company’s creditors as a whole than would be likely if the company were to be wound up; &
3. The realisation of some or all of the company’s property to make a distribution to one or more secured or preferential creditors.
What does the administrator do?
The administrator can do anything necessary to manage the affairs, business and property of the company.
1. Taking control and possession of the company’s property;
2. Selling and disposing of the company’s assets;
3. Bringing and defending legal proceedings in the name of the company;
4. Carrying on the company’s business; &
5. Taking out or surrendering leases in the name of the company.
An administrator must perform his functions in the interest of the company’s creditors as a whole, and he must perform them as quickly and efficiently as is reasonably practicable in the circumstances.
Why should I put my company into administration?
When a company enters administration, it has the benefit of a statutory moratorium.
This prevents creditors from enforcing their rights and provides the company with a bit of breathing space.
This enables the administrator to reorganise a company’s affairs without pressure from creditors. It also prevents the commencement of alternative insolvency proceedings, such as liquidation.
When a company comes out of administration, it has to have a route to do so.
If the administration is successful, the company will be able to continue trading – in the same way that it did prior to the administration.