Administration with Ingenious Turnaround
What is Administration?
Administration is an insolvency process that allows struggling companies that still have good prospects, to recover and/or be sold on to a new buyer. Directors can voluntarily appoint administrators, or administration can be imposed upon a company by a charge holder.
The process of administration is NOT the same as liquidation – Though administration can end in liquidation if no other routes can be found. During administration, the appointed insolvency practitioner takes over control of the company and it’s finances, removing the burden from the directors. The Insolvency Practitioner then analyses the business in an attempt to resolve the debts and save the company.
If you’re in trouble and are being chased by creditors, we’re here to discuss the best route for your company. Our experts will analyse your current situation and present the best course of action to move forward for you and your organisation.
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Administration vs Pre Pack Administration
Pre Pack administration involves taking an existing failing business and removing the bad debts by selling the assets on to a new company with funds being paid to the old company for the benefit of creditors – This can be run by new owners/directors or in many cases the same ones as before.
A Pre Pack administration is only a viable option in companies with good future prospects once the aged debts have been removed.
Pre Pack Administrations are:
- Cheaper than traditional administration
- Faster – Can be completed within a few days
- Continue business on in new company. Company protected during the administration, new company takes over assets and continues on trading.
Note: The directors will need to find the funds to purchase the assets from the old company during a pre pack administration. Ingenious Turnaround can work with the directors to find this.
Advantages and disadvantages of administration
- Any legal action from creditors is immediately halted, protecting the company from compulsory liquidation or other legal action during the administration period.
- A licensed insolvency practitioner is appointed, meaning that any actions taken by the company during this period are in the interests of the company and attempting to salvage anything moving forward.
- The licensed practitioner is given time to analyse the financial standing of the company and communicate this position (and the resolution of the administration) with creditors.
- Prevents the financial position of the company from worsening
- During a pre-pack administration, the administrator can propose a CVA (company voluntary arrangement).
- If a pre-pack has been agreed, then the business can continue moving forward through a new limited company.
- During an administration period the directors are no longer in control of the company – The appointed licensed insolvency practitioner takes over.
- The administrator is duty bound to inform suppliers and creditors that the company is in administration, meaning it will soon become public knowledge.
- One of your creditors or your bank may be entitled to appoint their own administrator.
- During Pre-Pack administration, TUPE regulations apply. These state that all old employee contracts must be transferred over to the new limited company. This can be an issue if payroll was one of the reasons the company was driven to administration to begin with. Redundancies can be made prior to the administration phase, however.
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