The Administration option provides Companies with protection, often from imminent threats from creditors.
The process, empowered by the Insolvency Act 1986, allows a Licensed Insolvency Practitioner to be appointed as Administrator with a view to, where possible, rescuing the Company and/or its business.
Your chosen Insolvency Practitioner, hopefully Steve Ford of S P Ford & Co., will work with you to try and achieve the best possible result for you and your creditors.
Often the best solution for a Company is for its assets to be sold, for a fair value, to those who already know how it operates i.e its current Directors.
A pre-pack Adminstration gives protection to the Company from its creditors while the Directors and Insolvency Practitioner work together to assess a fair value for the business. When an agreement has been reached which both the Insolvency Practitioner and the Directors, or whoever is purchasing the business, are comfortable with, the Administrator is then appointed.
As soon as the Administrator is appointed he signs over the business to the purchaser, typically the Directors of the original company. The Administrator then notifies the Company’s creditors that the Company is in Administration and that the business has been sold.
In order to justify the use of the Administration process the Insolvency Practitioner has to be able to evidence that a better return to at least one class of creditor has been achieved as oppose to the option of Liquidation.
Typically the Administration option will be used where there are assets with a fairly significant value (£15,000 or more). Where the assets are worth less than this the process of a Phoenix Liquidation is more appropriate and can achieve the same goal, legitimately transferring the assets of the insolvent Company back to its Directors to allow them a fresh start.