If your company is insolvent and cannot pay its debts when required, it could be at risk of liquidation.
Company administration is a legal procedure that allows your company to protect itself from legal action. The process allows insolvent companies to work out whether continued business is possible.
Many companies enter administration to either:
Administration offers pros and cons but could be your best option for restructuring and recovering businesses – especially those which are commercially viable but struggling with excessive debts or potential lawsuits.
If your company is insolvent and faces the threat of legal action from its creditors, it may be in your best interests to enter into administration. However, administration is not for all companies and may not be your best step forward.
Companies that are insolvent, with a reasonable amount of assets (such as property, equipment or bank account funds) and stable cash flow are most suitable for company administration.
One of the biggest advantages is that it places all legal actions placed against your company on hold and protects it from the threat of liquidation via a winding up order.
It is also a good way of biding time to review your financial position and put together a plan for repaying creditors.
If your business is burdened with debt but is still commercially viable, entering into administration can also allow you to protect continuity through a pre-pack or propose a Company Voluntary Arrangement (CVA) to repay creditors over a certain period.
Administration is best suited to businesses with significant assets and predictable, steady cash flow. If your company has limited assets and weak cash flow, it may be more beneficial to propose a Company Voluntary Arrangement instead.
One of the biggest downsides of administration is that it requires you and other directors to give up control of your company. The administrator will manage your company’s affairs throughout the course of the administration itself.
The process is also public. Companies in administration are legally required to inform their clients, creditors and employees that they are in administration via a note specifying so in invoices and other correspondence.
Administration is an expensive process and is only suitable for companies with sufficient cash flow and assets.
We’ve helped hundreds of companies recover from insolvency and return to regular trading. If your business has a viable commercial future and needs to restructure its operations and repay creditors, administration could be your best option.
We can offer personalised assistance to you and other directors to ensure that your business has the brightest future possible. Contact us today to learn more about the company administration process and how we can help your company’s recovery.
We have a team of advisers who have helped hundreds of businesses around the UK that have faced financial pressures on every scale. You are not alone.