Administration Frequently Asked Questions

Who can propose Administration?

The company and its directors.

What does Administration mean?

Administration is a type of formal insolvency process aimed at providing protection to a company which is struggling financially. In an administration the company will be protected by the courts from creditors pursuing legal action. A licensed Insolvency Practitioner must be appointed as Administrator to manage the company’s affairs through the administration process.

What is involved in a Pre Pack Administration?

A pre pack administration involves a relatively quick process whereby the business and assets of the insolvent company are sold to a third party (new company) leaving the liabilities to be dealt with by the Administrator. The procedure is managed by a licensed Insolvency Practitioner who will act on behalf of the court as Administrator.

What is the role of the Insolvency Practitioner (Administrator)?

The administrator is responsible for managing all company affairs, business and property whilst in administration. It is their duty to either rescue the company as a going concern, achieve a better result for the company’s creditors as a whole than would be possible if the company was wound up or release property in order to make a distribution to one or more secured or preferential creditors.

The administrator will have eight weeks to distribute proposals to creditors detailing their appointment and the circumstances of the company being placed into administration. The administrator will also outline what outcome they anticipate and may call an initial creditors meeting with a view to having the proposals accepted.

How long does the Administration process last?

The process should be completed within 12 months, although this can be extended by the consent of the court.

What happens at the Creditor’s Meetings?

The initial creditor’s meeting should be held within 10 weeks of the date that the company entered administration, and the creditors must be given at least 2 weeks notice of the meeting. At the meeting the proposals will be discussed giving creditors the opportunity to accept, reject or modify the proposals by a majority vote. Once proposals have been accepted the Administrator will manage the company’s affairs as agreed by the creditors.

What happens to the company’s liabilities?

When a company enters Administration all of the company’s liabilities stay with that company, with the exception of the employees Transfer of Undertaking & Protection of Employment (TUPE) claims; which will transfer to the new company if there is a going concern sale.

Do all Crown (VAT, PAYE, NIC & Corporation Tax) debts still retain preferential status?

No, all claims are now unsecured claims against the company.

What impact will this have on other creditors?

Secured creditors whose debt is secured against assets of the company are subjected to contractual terms and conditions which cannot be changed unless they release their charge and depending on the terms of their charge will rank ahead of preferential and unsecured creditors. Secured creditors are likely to see a greater return in pre pack administration than can be expected in other insolvency procedures.

Unsecured creditors will be paid following full settlement of secured and preferential creditors (employee?s claims). It is the responsibility of the administrator to forward proposals and liaise with all creditors regarding the company’s situation.

How will this affect employees?

In the event of the business being sold as a going concern all employees will maintain their rights and be transferred to the new company. However, legal advice should be taken to ensure employees are treated accordingly.

Is a pre pack administration an appropriate solution?

RNF Business Advisory Limited will advise in each individual case what we believe is the most appropriate solution for your company. Pre pack administrations are used in cases where if they are not sold the business will inevitably cease trading. Through the pre-pack route the business can be sold quickly reducing negative attention surrounding the financial situation and continue to trade under a new company whilst retaining customer, suppliers and employees.

How does a Pre Pack Administration affect my bank?

In the event the bank is a secured creditor, the Administrator will work with them to resolve the company’s debt. Some banks may provide forward funding for the new company but others have been known to make it policy not to do so.

How long will the process take?

There can sometimes be a financial pressure in a pre-pack administration case which RNF Business Advisory Limited are able to assist with. Timescales largely depend on previous planning and the co-operation of those involved, however we will act quickly and effectively to complete the process.

Working with you

We will work with you to explore your situation in detail and provide clear, jargon-free, honest advice. Rest assured, anything discussed with us remains confidential.

All initial consultations are free of charge and without obligation.

When you need help

Call Ruth on 01622 764 612
Call Ruth on 020 7253 7171

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