Administration is a procedure available to a company that is insolvent, or is likely to become so, which places the company under the control of an Insolvency Practitioner. Administration has the legal protection of the court against creditor action, and is designed to help struggling but potentially viable companies. If your company is in debt and you are being pressured by creditors, or are being threatened with legal action, seeking the protection of Administration could halt any action being taken against the business.
Administration is recommended where:
- There is intense pressure on cash flow but there is still a good business to preserve.
- The company has been unsuccessful persuading creditors to agree out of court, or through consensual means to an alternative course of action.
- An agreement with all creditors is not possible within a manageable time-scale.
- There is a need to quickly sell the business of a technically insolvent company.
- The company is insolvent and the directors are concerned about the risks of wrongful trading.
While a company is in Administration creditors are prevented from taking any actions against it, except with the permission of the Court or the Administrator. The Administration process is a useful and powerful tool providing the conditions are right. It is subject to clear guidelines and DFW Associates, as Insolvency Practitioners, would need to ensure that it is the best possible solution.