Company Administration
At Campbell Crossly & Davis, we know how stressful it is when a business faces serious financial problems. If your company is dealing with pressure from creditors, the risk of court proceedings, or trouble paying its debts, one possible solution is to put your company into administration. This is a formal process under the Insolvency Act 1986, which protects your business from legal action while a recovery or sale plan is put together. Our experienced licensed insolvency practitioners can guide you through the administration process and work towards the best outcome for you, your creditors, and your employees.
What Is Company Administration?
Company administration is a legal process where control of your business passes to an appointed administrator. Their job is to rescue the company or, if that is not possible, get the best return for secured or preferential creditors. Once a company enters administration, a moratorium comes into effect. This stops most creditor action and gives time to review the business and plan the next steps.
When you enter administration, the administrator takes over decision-making from the directors. This change is designed to give the company a chance to recover or be sold in a way that benefits everyone involved.
When Should a Company Enter Administration?
Administration is usually an option when a business is insolvent or likely to become insolvent soon, but still has valuable company assets or a viable trading model. It can be a strong choice when there is heavy pressure from creditors, such as threats of winding-up petitions, but there is also a real chance to sell the business, restructure, or achieve a Company Voluntary Arrangement (CVA).
At Campbell Crossly & Davis, we often recommend administration when:
- The business can be saved, but it needs immediate protection from creditors.
- There is a likely sale that could protect value and jobs.
- A floating charge holder is willing to support the process.
- Administration will give creditors more than they would get from liquidation.
If your company has few assets or no chance of recovery, liquidation may be a better option.
Who Can Put a Company into Administration?
The administration process can be started in three ways:
- By the company’s directors or shareholders to prevent creditor action.
- By a qualifying floating charge holder, usually a bank or secured lender.
- By the court after a creditor applies.
When directors choose to put your company into administration, they can select the licensed insolvency practitioner to act as administrator. If there is a secured lender with a qualifying floating charge, they may appoint their own administrator.
The Administration Process Step-by-Step
While the exact steps depend on the company’s situation, most administrations follow this process:
1. Intention to Appoint an Administrator
The directors file a notice of intention to appoint an administrator at court and send a copy to any qualifying floating charge holder. This gives five business days’ notice and triggers an interim moratorium to protect the company from creditor action.
2. Appointment of the Administrator
The appointed administrator takes control of the company’s assets, finances, and operations. They notify Companies House and publish a notice in The Gazette.
3. Moratorium Period
From the moment the company entered administration, most legal action against it is stopped unless the administrator or court allows it.
4. Assessment and Proposal
Within eight weeks, the administrator must prepare a statement of proposals outlining how they aim to meet one of the statutory objectives.
5. Creditors’ Decision
Creditors review the proposal and vote on it. If approved, the administrator follows the agreed plan.
6. Ongoing Management
The administrator may keep the company trading, arrange a sale, or prepare for another insolvency process.
Possible Outcomes of Administration
The results of administration can vary:
- Rescue the Company – Restructure or refinance the business so it can return to director control.
- Sale as a Going Concern – Sell the business as a whole, often through a pre-pack administration, to protect value and jobs.
- Achieve a Company Voluntary Arrangement (CVA) – An agreement to repay creditors over time while trading continues.
- Liquidation – If rescue is not possible, the company’s assets are sold to repay creditors.
- Dissolution – The company is closed and removed from the register after assets are sold.
Pre-Pack Administration
A pre-pack administration involves agreeing the sale of the business or its assets before the company enter administration, then completing the sale as soon as the administrator is appointed. This can protect the brand, keep customers, and save jobs. It must follow strict rules, with the administrator giving creditors a full report on the sale.
Impact on Stakeholders
Employees
If the administrator continues trading for more than 14 days, employee contracts are adopted. This means employees become preferential creditors for unpaid wages and holiday pay. If the business is sold, TUPE regulations usually protect jobs, terms, and length of service.
Creditors
The moratorium pauses creditor action while the administrator works to maximise returns. Payments follow a set order, with secured creditors first, then preferential creditors, then unsecured creditors.
Customers and Suppliers
Contracts may continue if they help the rescue plan. Suppliers with goods under retention of title must contact the administrator before collecting them.
How Long Does Administration Last?
Administration normally lasts up to 12 months, but can be extended by the court or with creditor agreement if more time is needed. The length of the process depends on the complexity of the case and the value of the company’s assets.
Advantages and Disadvantages of Administration
Advantages
- Immediate protection from creditors through the moratorium.
- Time to restructure or sell the business in a planned way.
- It can protect jobs and customer relationships.
- Often provides better returns to creditors than liquidation.
Disadvantages
- Directors lose control to the appointed administrator.
- The process is public record through Companies House and The Gazette.
- Costs can be high, so it may not suit businesses with low asset value.
Why Choose Campbell Crossly & Davis?
At Campbell Crossly & Davis, we have helped many companies navigate the administration process with skill and care. We follow the Insolvency Act 1986, provide clear advice, and work towards solutions that protect value and achieve the best possible outcome. Whether your aim is to rescue the company, achieve a Company Voluntary Arrangement (CVA), or sell the business, we can act quickly to protect your position.
If you think your business could benefit from entering administration, contact us today for a private consultation. We will review your situation, explain your options in plain language, and guide you through the next steps. For further information, please contact a member of our team on 01253 349331.
This note is meant as a brief overview of Administration. It is not a detailed review and further detailed advice should be taken before coming to any decision. No responsibility can be accepted by Campbell Crossley and Davis, its partners or employees for any loss occasioned by any person or persons acting or refraining from action as a result of material contained in this note.
