Directors of limited companies need to take action early enough to have a choice if things start to go wrong.
If there is a good prospect of keeping some part of the company alive or of producing a better return for some part or all of the creditors, then an administration can be quickly put in place. It is a procedure that is available to the directors. However if there is Bank involvement as a floating charge creditor the Bank has to be given notice by the proposed administrator and must consent to the appointment. In some cases the Bank will intervene and appoint its own administrator instead. It is therefore a procedure also available to a lender in certain circumstances.
An administration does not always lead to an ongoing business being handed back to the directors. More often there is an orderly realisation of assets producing a more beneficial result for the creditors than a sudden closure. It may also be used as an intermediate procedure enabling a Company Voluntary Arrangement to be put in place.
In an Administration the administrator will be an insolvency practitioner and that person will have the responsibility for the day to day management of the business of the company. There are a number of benefits to an administration which provides a moratorium on action being taken by creditors unless they first seek Court approval to continue.
Distributions to creditors are rarely made directly through an Administration and it is more usual for the Administration procedure to act as the conduit to either a Company Voluntary Arrangement or liquidation.
For more help with insolvency procedures, contact us to make an appointment.