If a company is in Administration it means that the business has been protected by a Court order with the objective of:
- Rescuing the business as a going concern
- Getting a better return for creditors than liquidation
- Repaying secured or preferential creditors
As a director, your powers end once the company goes into Administration.
How does the process work?
If you’re new to the topic, read our simple guide to get your head around the subject first. The most common reason to go into Administration is firstly to protect a business and give it time to work out the best solution. This may mean an organised close down or it may result in selling all or part of the business to a new owner or the existing management.
It also means that the business is under the control of the licensed insolvency practitioner appointed by the Court acting as the administrator.
Once a company has entered Administration, no creditor can take any action against the business without the Court’s or administrator’s permission. This includes; all suppliers, retention of title creditors, financial companies, HM Revenue and Customs, business rates, employee claims, banks, directors and shareholders.
The objective of Administration is to protect the business whilst the best solution is worked out. This is usually decided within the first eight weeks.
The whole process normally lasts for up to 12 months but can be extended with creditor approval for a further six months or with the Courts approval for a further 12 months.
Your director’s powers end when entering the first stage of the process, but you still have to co-operate with the administrator and if you fail to comply with their reasonable requests they can apply to Court to make you comply.
“If a company is in Administration it means that the business has been protected by a Court order”
A word of advice
If you have any choice in who is appointed as administrator I would recommend meeting with them first to make sure you get on. You should also discuss with them the plan of action once they are appointed.