Administration

The process for administration:

1. The directors of the company appoint an administrator, or a creditor requests the courts to appoint administrators.
2. The insolvency practitioner determines whether administration is the optimum solution.
3. If the financial status of the company appears beyond recovery the insolvency practitioner may decide to proceed with a creditors’ voluntary liquidation.
4. If the insolvency practitioner determines that administration is viable they prepare for administration.
5. If the company has a qualifying floating charge the charge holder is given advance notice of the administration.
6. Directors or officers provide a detailed statement of company affairs. This document details the assets and liabilities of the business.
7. Within 8 weeks of entering administration the administrator sends proposals to all creditors with the statement of company affairs.
8. Within 10 weeks of entering administration (unless the period is extended by the courts) a creditors’ meeting is held.
9. At least every 6 months the administrator sends progress reports to creditors, the court, and the registrar of companies until the company exits administration.
10. The company remains in administration until its financial status has improved or the business is sold or restructured, or it ceases trading and enters liquidation.

 

What is Administration? Administration Explained

The process of administration is the result of a company, its directors, or one of more creditors requesting the courts to appoint administrators.

The company directors can appoint an administrator to pre-empt action from creditors because once the company enters administration no further action can be taken by creditors and the company is protected from being forced into compulsory liquidation through winding up liquidation by the courts.

If the company has a qualifying floating charge which is registered at Companies House the charge holder is given advance notice of the plan to enter administration and the holder of the floating charge can appoint their own administrator.

Administrators are insolvency practitioners and they are appointed to run the company. The powers of administrators are broad and they replace the existing directors. The primary objective is to keep the company operating as a going concern to achieve the best possible returns for creditors.

Before placing the company into administration, the insolvency practitioner will make a detailed examination of the financial status of the company, its assets and liabilities, and cash flow, and determine whether there is any potential for recovery. If there are no realistic options for the business to continue trading in some form, then the insolvency practitioner may decide that the company must cease trading and enter creditors’ voluntary liquidation.

If the insolvency practitioner determines that the company should enter administration then the administrators may sell parts of the business and its assets and will look to reduce costs.

The administrators may negotiate with lenders, asking them to forgive a proportion of any outstanding debt, on the basis that easing the financial burden on the company enables the possibility for the company to continue trading in some form, and the remainder of the debt may then be recovered.

Other possible options may include selling the business to a new owner capable of providing funding, re-capitalisation by creditors exchanging debt for shares in a newly restructured company, or a so-called demerging liquidation of all saleable assets to pay creditors.

Once the company enters administration all correspondence from the company or its representatives must include the statement "in administration" next to the company name.

 

Administration Notices

The following is a list of Notices that can be published during the process of administration and what they mean: 

2410 Appointment of Administrators (Notice 2410 under Administration). Indicates the date of appointment and the name and address and contact details of the administrators.

2411 Administration Orders (Notice 2411 under Administration). An administration order is usually applied for by the company directors or shareholders and confirms the appointment of administrators as part of the corporate insolvency process. The administrator places the notice indicating the date of appointment and the name and address and contact details of the administrators.

2412 Meetings of Creditors (Notice 2412 under Administration). An announcement that the administrator has called a meeting of creditors which can be virtual or physical, where creditors can vote on the proposed approach. A creditor may appoint a person as a proxy-holder to act as their representative and to speak, vote, abstain or propose resolutions at the meeting. In order to be counted a creditor’s vote must be accompanied by a proof in respect of the creditor’s claim.

2413 Notices to Members (Notice 2413 under Administration). An announcement by the administrator during the administration process, typically advising that interested parties can obtain a copy of the statement of proposals for administration.

2414 Deemed Consent (Notice 2414 under Administration). The administrator places a notice seeking approval from creditors in respect of their proposals or a revision of original proposals. The proposals will be approved unless the administrators receive objections from 10% or more of creditors.

 

See also corporate insolvency:

Administration

Creditors' Voluntary Liquidation (CVL)

Winding Up Petitions and Winding Up Orders

Members’ Voluntary Liquidation (MVL)

Receivership

Company Voluntary Arrangement (CVA)

Liquidation

Company Insolvency Procedures

Warning Signs of Insolvency