The Process For A Company Going Into Administration

Definition of administration

Administration provides breathing space to allow a rescue package or more advantageous realisation of assets to be put in place. An administrator is appointed to manage a company’s affairs, business and property for the benefit of the creditors. The person appointed must be an insolvency practitioner and has the status of an officer of the court (whether or not he or she is appointed by the court).

The objective of administration is to:

Rescue a company as a going concern

Achieve a better price for the company’s assets or otherwise realise their value more favourably for the creditors as a whole than would be likely if the company were wound up (without first being in administration)

In certain circumstances, realise the value of property in order to make a distribution to one or more preferential creditors

Companies Entering Administration

A company enters administration when the appointment of an administrator takes effect. An administrator may be appointed by:

an administration order made by the court

the holder of a floating charge

the company or its directors

the liquidator of a company

the supervisor of a CVA

a designated office of a magistrates’ court

The administrator must perform his or her functions as quickly and efficiently as reasonably practicable in the best interests of the creditors as a whole.

Approval Of Statement Of Proposals

The administrator will be able to use a process of deemed consent where they write to creditors with a proposal. Provided they do not receive objections from 10% or more of creditors then the proposal will be deemed to be approved. If 10% or more creditors object then the office holder will use an alternative decision-making process, such as a virtual meeting, correspondence or electronic voting.

Where the proposal is deemed to have been approved the administrator must, as soon as reasonably practicable, deliver a notice of the date of deemed approval to the registrar.

Administration Can Be Converted To Creditors Voluntary Liquidation (CVL)

The administration can be converted to CVL where the administrator of a company thinks the total amount each secured creditor of the company is likely to receive has been paid to him or set aside for him and that a distribution will be made to any unsecured creditors of the company.

The administrator must send form AM22, Notice of move from administration to creditors’ voluntary liquidation, to the registrar. The company converts from administration to CVL on the date of registration of form AM22. Once the form has been registered, Form 600, Notice of appointment of liquidator must also be filed. The appointment of the liquidator must not be before the date the company went into liquidation i.e. the date of registration of form AM22.

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HMRC Information

This information was taken from the Government's website which provides businesses advice regarding Liquidation and Insolvency.

To find out more, please visit Liquidation and Insolvency

Notification when a company is in administration

As soon as reasonably practicable, an administrator must send a notice of his or her appointment to the company and each of its creditors and publish notice of his or her appointment.

The administrator must also send a notice of his or her appointment to the registrar of companies.

The process of administration

Soon after his appointment, the administrator will request a statement of the company’s affairs from relevant people (e.g. an officer or employee of the company).

As soon as practicable and before the end of eight weeks after the company enters administration, the administrator must make a statement setting out proposals for achieving the purpose of the administration or explaining why they cannot be achieved. The proposals may include a voluntary arrangement or a compromise or arrangement with creditors or members.

The statement setting out the proposals must be sent to:

The registrar of companies

Every creditor of the company whose claim and address he is aware; and

Every member of the company whose address he is aware

Creditors will be asked to approve (with or without modifications) the statement of proposals. Following the initial meeting, the administrator may form a creditors committee. The administrator must notify creditors of any revisions to the proposals.

Any decisions taken by creditors must be reported to the registrar of companies.

When Administration Ends

There are several ways in which administration can come to an end.

Administration can end automatically one year from the date the administration took effect. Notice must be given to the registrar. However, the administration may be extended with the consent of creditors or the court.

Any extension must be notified to the registrar.

An administrator who thinks that the purpose of administration has been sufficiently achieved must file a notice with the court and the registrar.

An administrator appointed by a court order may apply to the court to end administration if he or she thinks that the purpose of the administration cannot be achieved or the company should not have entered administration, or a creditors’ decision requires him to make an application. The court will discharge the administration order and the administrator must notify the registrar.

An administrator appointed by the holders of a floating charge or by the company or its directors may end administration when the purpose of administration has been sufficiently achieved. The administrator must file the notice with the court and with the registrar.

Administration may end on the application of a creditor to the court. If the application is approved the administrator must send a copy of the order with the relevant form to the registrar.

Administration may end and move into dissolution. This can happen if the administrator thinks that a company has no property with which to make a distribution to its creditors. The administrator must send notice of this to the registrar and the company will be dissolved 3 months after the date the form is registered unless an order is made to extend or suspend the period, or stop, the dissolution. Notice of any order must be sent to the registrar.

Creditors Voluntary Liquidation

If you feel that your business is no longer viable and cannot continue to trade, we work with industry leading specialists to provide a simple, hassle free process to legally dissolve your business. To find out more, please take a look at our Creditors Voluntary Liquidation or CVL Service.