What does it typically involve?

Administration can be initiated by shareholders, directors or creditors. It is generally used to obtain protection from the general body of creditors whilst the company considers its options.

This process allows a company under severe financial pressure from its creditors to relieve that pressure. The administration provides the company with protection from creditors. The process can be instigated by the company, its directors or a creditor.

Once the company is protected, the administrator will assess the company’s chances of survival and will decide whether the company can be rescued, a sale of the business can be achieved, or whether a controlled wind down of the company should be undertaken.

An administrator, once appointed effectively, takes over the running of the company and can continue to trade if he/she believes that it is in the best interests of the company to do so. The administrator will contact all creditors and set out his/her proposals to deal with the company’s financial difficulties.

Depending on the chosen path, the company can survive and control be returned to the directors at some point in the future. The company may enter into another insolvency process or the assets can be sold and a distribution made to creditors before the company is struck off.

?We must stress that this is a brief overview and is not intended to allow a director to self-diagnose. We would recommend that if you are under threat or considering entering into administration, you contact us for a free consultation to ensure that you take the appropriate action.

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