An Administration is a process whereby an Insolvency Practitioner is appointed as the Administrator of an insolvent company, and in many cases the Directors themselves can instigate this, allowing a company, under pressure from its creditors, to relieve that pressure as the administration process provides protection by law from its creditors in the form of a moratorium, and will allow time in which to consider the options.
The aim of an Administration must be either to rescue the company as a going concern, provide a better outcome to creditors than the Company being wound up (without first being in Administration), or to provide a distribution to the secured and/or preferential creditors.
Once appointed, an administrator, who is classed as an officer of the Court, effectively takes over the running of the company and can continue to trade if he/she believes that it is in the best interests of the company to do so. The administrator will contact all creditors and set out his/her proposals for achieving the purpose of the administration as soon as reasonably practicable after the company enters administration, and in any event within 8 weeks of the company entering administration.
An administration order will last for 12 months, however the administration can be ended sooner or extended, with the correct consents, beyond 12 months for a specified period.
Where stringent tests can be met, some administrations are in the form of a ‘PrePack’. More information about these is provided below.
It should also be noted that an administrator is required to investigate the company’s financial affairs and submit an assessment of the directors conduct to the Secretary of State within three months of the Administration Order.
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