What Happens in a Company Administration?

On his appointment the Administrator will work with the directors to develop a plan for rescuing the company and repaying creditors. This could involve:

  • A sale of the business and assets and the payment of creditors from the proceeds
  • Formulation of a Corporate Voluntary Arrangement

This could involve, for example, the continuation of the trade of the company and the repayment of creditors from ongoing trading receipts

The Administrator will be responsible for managing the Company's affairs and business as long as the Order stays in effect. Once the purpose of the administration has been achieved he will vacate office. Control over the company passes to the Administrator but the directors remain in office.

Once the order has been made, any petition for winding up is dismissed and as long as the order stays in force a creditor cannot present a petition to have the company wound up. In addition:

  • A secured creditor cannot take steps to enforce his security (e.g. HP or lease creditors).
  • A landlord cannot forfeit a lease without the Administrator's consent.

The Administrator will hold a meeting of the creditors within 3 months of his appointment and ask them to approve his proposals.

The Administration procedure is set out in the Insolvency Act 1986. Previously the procedure involved an application to the Court but the Enterprise Act 2002 (which came in on 15th September 2003) has streamlined the whole process so that now only certain documents need to be filed in Court and a formal application is not now necessary.

Directors should always consult a Licensed Insolvency Practitioner as soon as they become aware that their business is in financial difficulty. Gore and Company can help in a variety of ways:

  • We can complete a rapid review of the business and advise on the most appropriate course of action
  • We can act as Administrator of the company and develop rescue proposals
  • We can assist the directors to develop a corporate voluntary arrangement

Corporate voluntary arrangement would enable the directors to remain in control of the company whilst implementing a scheme to enable creditors to be paid a proportion of what they are owed.

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