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SPK Financial Solutions Limited have rebranded to Mackay Goodwin Limited
Please note, SPK Financial Solutions Limited have rebranded to Mackay Goodwin Limited. Please be assured, we are the same team as before, providing the same tailored professional advice and services. Our contacts numbers remain the same, so if you have any queries just give us a call!
An Administration Order is a legal process that can be used to help a company that is experiencing financial difficulties.
The process is governed by the Insolvency Act 1986, and it is typically used as an alternative to liquidation (the process of shutting down a company and distributing its assets to creditors).
When a company enters into Administration, an administrator is appointed to take control of the company’s affairs, and the primary goal of the process is to try to rescue the company as a going concern. The administrator has broad powers to make decisions about the company’s assets and liabilities, and to take whatever action they consider necessary to achieve this goal. This can include renegotiating contracts with suppliers, selling off assets, or cutting costs.
One of the key advantages of Administration is that it provides a company with a period of “breathing space” during which it is protected from legal action by its creditors. This can give the company time to restructure its affairs, or to negotiate a formal arrangement with its creditors to pay off its debts over time.
An Administration Order can also be used as a way to implement a pre-packaged sale of a business, to ensure that the most important parts of the business and assets are transferable to a new entity or buyer in an orderly fashion and with creditor protection.
It’s important to note that Administration is not an easy or inexpensive process and not all companies can be saved through the administration process. In some cases, the company may still have to be liquidated if there’s no way to save it.
What is the process for getting a company into Administration?
01
The company or one of its directors must first make an application to the court to have the company placed into Administration. The application must be supported by a statement of the company’s affairs, which must show that the company is unable to pay its debts as they fall due.
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Once the application has been made, the court will hold a hearing to consider whether to grant an Administration Order. At the hearing, the court will consider whether the company is likely to benefit from being placed into Administration, and whether it is in the best interests of the company’s creditors.
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If the court is satisfied that an Administration Order is appropriate, it will make the order and appoint an administrator to take control of the company’s affairs. The administrator is usually a licensed insolvency practitioner, who is appointed by the court or by the company’s creditors.
04
Once the company is in Administration, the administrator has a number of specific duties, including:
• To take control of the company’s property;
• To carry on the company’s business with a view to rescuing it as a going concern;
• To keep the company’s creditors informed about the progress of the Administration; and to act in the best interests of the company’s creditors as a whole.
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The administrator is also required to provide a detailed report to the court within 8 weeks of the Administration Order, setting out what steps they have taken to rescue the company, and what is the progress and outcome of their efforts.
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The administrator will work to maximise the value of the company’s assets and try to reach a compromise or arrangement with the creditors, such as a company voluntary arrangement (CVA) or the sale of the business.