Administration is a way for a business to “take a breath” and get some external, expert help brought in to help streamline and reorganise it so it will be in a better position to re-emerge re-energised and ready to make a profit once again.
It’s a great option for a company that is temporarily having difficulty managing all of its financial obligations but doesn’t want to close down through a liquidation because it could be profitable again under the right circumstances.
An administration is a formal insolvency procedure that places the business temporarily under the management of an external administrator to see if a company can be turned around with some tweaks and changes to how things are being done.
Alternatively, they can also manage the sale of the business to new owners – including existing management – either as a going concern or in part to raise additional funds and service creditors.
If it can’t be turned around or has a decent chance of being profitable under better conditions then the administrator can close it and sell remaining assets to obtain the best return possible for the creditors.
Administration is quite a straightforward process and can be completed from beginning to end in seven distinct phases.
Place your Business in Administration in 7 Easy Stages
1. Initial advice meeting – takes a day
This usually free meeting can be held face to face or virtually and is where a company director can spell out what the financial position is and the insolvency practitioner can give some preliminary advice based purely on this information.
2. Review information and further advice – takes between one and 14 business days
The next stage is when the information is formally reviewed and official advice given based on these circumstances. A quote and the terms of business are provided at this stage for the work to be completed and the practitioner will go into more specific detail about issues such as how company assets will be dealt with and other issues that are specific to the business.
3. Arranging board meeting – takes between one and three business day
If the terms are agreeable then you will formally instruct the practitioner to place the company into administration at this stage. A director has to sign the administration documents at this stage.
4. Notice of intention to appoint an administrator – takes five business days
One additional stage is that if the company has a qualifying floating charge holder registered at Companies House then advance notice of the impending administration has to be given to them. The designated director who signs all the paperwork associated with the administration has to provide a statutory declaration on the document at this stage which has to be witnessed by a solicitor.
5. Administration is appointed – takes one business day
Once this notice period has expired or if the charge holder consents then the notice of the appointment of an administrator is filed in a court. The designated director has to file a further statutory declaration at this stage and again will have to be witnessed by a solicitor.
6. Statement of affairs – takes up to 11 business days
Once a business is placed into administration, the administrator is required to ask for a statement of affairs from the board of directors. It will contain a detailed assessment of the company’s assets and liabilities so can usually be prepared with the assistance of the company’s accountant. A copy has to be provided to Companies House when completed.
7. Closure – takes between nine and 12 months
During the administration and afterwards the administrator will work with the directors very closely. They will ensure that the company’s books and records are moved to the administrators office and that all company assets are properly realised and distributed. Once there are no more outstanding issues surrounding the administration then an application for dissolution can be made or the company can move into liquidation.
The most important first step of administration or any other procedure that could help a business is to get some free professional advice from an expert – the BusinessRescueExpert!