Company Administration Services

An administration must achieve one of the following statutory objectives:

• rescue of the company as a going concern, or
• achieving a better result for the company’s creditors than would be likely if the company were immediately wound up or
• realising property in order to make a distribution to secured and/or preferential creditors

An administration is designed to preserve either the company or the value of the assets, i.e. to achieve a better result than if the company was first put into liquidation. You can buy assets from a liquidator, and this may be an option depending on the circumstances.

It is a non-terminal procedure, unlike a Creditor Voluntary Liquidation.

Administrations are also beneficial from the point of view of creditors and staff. Creditors may not wish to lose a key supplier or customer and likewise staff will retain their continuity of employment rather than facing possible termination and redundancy.

Unless the administration is extended with creditor or court consent it will end automatically within 12 months.

Typically, the Administrators will provide for how the administration will conclude in their proposals which is sent to creditors within eight weeks of their appointment.

As an example, the administration could end by being handed back to the directors although this is usually unlikely. It could also enter liquidation or a CVA once the purpose of the administration is achieved.  Alternatively, the company could be dissolved.

This refers to an arrangement where the sale of all or part of a company’s business, or assets, has been negotiated prior to the appointment of an administrator.

The only reason to explore a pre-pack administration is because it is likely to create a better return for creditors than if the company went into administration without a deal or fell into liquidation.

Pre-packs are usually favourable where management or senior personnel wish to continue the business and will, therefore, have little service level disruption in the economic activity.

Statement of Insolvency Practice 16 (SIP 16) is designed to make the pre-pack process as transparent as possible for creditors and to ensure that the best value has been obtained for the sale of the assets or business in order to achieve a better deal for the creditors.

This will usually involve the Directors marketing the assets and business as far and widely as possible prior to the administration, along with ensuring that appropriate and professional valuations are obtained.

Where the sale is made to directors or those in senior management, it is a requirement that they provide a viability statement as to how they propose to avoid insolvency and how they will do things differently in the next 12 months.

The Administrators and Directors must be able to demonstrate that the best value was obtained and that the pre-pack administration was justified.

Yes, assuming the debt is not disputed you can still put the Company into liquidation, however, the option to do this out of court has now been removed.

You can still put the company into administration, but it must now involve an application to the court to do so.

There is no automatic dismissal of staff, and the administrators must deal with employees within 14 days. If any employees are retained after this date then their contracts will be adopted by the administrators.

Any staff that are transferred over to a new business or company as part of a deal with the administrators is likely to be subject to TUPE (Transfer of Undertakings Protection of Employment).

Those employees who are made redundant will be able to submit claims to the National Insurance Fund, via the Redundancy Payment Service, to recover amounts owed to them, such as arrears of wages, holiday pay, redundancy pay.

Yes, where this is a qualifying floating charge (QFCH), however, you will need to give the bank five days’ notice of a decision to appoint administrators. This gives the bank the opportunity to appoint their own administrators.

A QFCH is a floating charge that was made after 15 September 2003.

There is only one way an administrator can make a payment to unsecured creditors in an administration and that is where funds are available from the Prescribed Part.

The prescribed part is a pool of funds subject to a maximum amount in which the source of the funds has arisen from the realisation of floating charge assets. These funds are ring fenced.

The amount available is calculated as follows:

50% of the first £10,00 realised.

20% of amounts thereafter up to a statutory limit.

(the limit is £600,000 for charges dated pre-6 April 2020 and £800,000 for those dated afterwards). 

If there is any surplus of funds or, for example, the floating charge holder has been paid in full, then the administrators should end the administration via another type of insolvency process in order for a dividend to be paid to the unsecured creditors.

There are three ways for an administration to end:

• the company is returned to the Directors
• the Company is dissolved
• the Company exits via another insolvency procedure, for example a CVL or a CVA

The details for the exit route will be contained in the Administrators proposals and subject to the approval of creditors.