Administration is the process by which a company is temporarily protected from its creditors while a solution is sought. A licensed insolvency practitioner is installed to oversea (administer) the company and will seek to either turn the company around through alternate funding, or buying the company some breathing space by negotiating new credit agreements with creditors. If this isn’t possible, then the administrator will look to liquidate the company to the benefit of its creditors, perhaps through a ‘pre-pack administration’.

Berley Insolvency, as licensed insolvency practitioners, can act as administrators if your business is in trouble and needs assistance with the administration process.

The need to accept, acknowledge and move on

Faced with mounting debt and a cash flow crisis brought on by changes in the economy or just within an industry, companies are faced with two choices: Try to survive by temporarily holding off creditors while solutions are sought, or liquidating the company and ultimately winding it up.

For the owners of a business in this situation, the process of getting to these choices requires acceptance. For some, procrastination sets in. The process of acknowledging to themselves that the business is in trouble and will likely fail if no action is taken, can take too long and deepens the crisis, possibly beyond the point where remedial action can be taken.

Once a business owner ‘wakes-up’ and admits to themselves, acknowledging the severity of the situation, progress can be made and business owner can move on. 

Why it’s important to take control of the situation

Creditors have the power to force a company into receivership or into compulsory liquidation. The important issue here is for you to act before your creditors do. Once creditors act, they or the courts get to dictate the process, which will likely to lead to liquidation and final dissolution of the company. 

By acting first, you get to choose the path and even appoint your own administrator or licensed insolvency practitioner. With solid advice from an insolvency practitioner, you can also decide if you want to buy some time through the administration route, to see if circumstances can be improved and for the business to be turned around.

When should I consider a Company Administration?

Company administration can be used as a way to avoid liquidation or going into receivership, however, circumstances need to be considered.

First start by looking at the financial pressures the company is experiencing. Is the company being threatened by creditors or perhaps by HMRC for VAT or corporation tax payment? Is this the first time or has this happened repeatedly?

Next, talk to a licensed insolvency practitioner at Berley Insolvency. Our practitioners will help you decide which is the best route for you and your business. 

Company administration is a potential way to turn around your company. For instance, a company may have a solid basis to continue, for example: current circumstances have come about through little fault of its own, such as a cash flow crisis bought on by temporary market conditions or the collapse of a key client or supplier. In this situation, the company simply needs a little time to recover and perhaps seek new short term financing to bridge the gap. 

You may have approached creditors already, explaining your situation and asking for more time. They may have responded negatively, applying pressure to pay or face compulsory liquidation. Under these circumstances, you need some protection to allow you time to seek alternative remedial action. This is where entering into a Company Administration could be beneficial.

It’s important to point out that administration isn’t an answer to the problem. At best, it’s a temporary stop-gap to relieve the pressure from creditors while you make alternative arrangements or come to the conclusion that liquidation is the best route. It does however, put you in control of the process and ultimately the process by which the company wound up.

What is a Pre-pack Administration?

A pre-pack administration is where the company’s directors decide that either they or an interested third party can buy the assets of the company. It is a formal insolvency process and a way through which the funds from the purchase can be used to offset creditor debts.

It is also a way through which company directors can look to start again by legally acquiring the assets necessary to start a new business. The assets may include staff in addition to equipment and intellectual property. 

A pre-pack usually happens at specific point in the administration process, where the directors and administrator decide that a quick sale of assets could preserve the value of assets as well as key business relationships and possibly saving jobs in the process. This would see the business continue as a different entity, but also provides a way to pay back as much debt to creditors as quickly as possible. 

Putting you in control –  talk to Berley Insolvency

Faced with the prospect of your business being brought to a close, it’s a good thing to have options. Administration is one such option and one that keeps you in control of your business, at least for the time being. 

If the business does need to end in liquidation, at least you have some control over the process.

The important point is that you must act first, recognise the difficulty your business is in, and that if you don’t act first, your creditors will. So call Berley insolvency today and talk to one of our expert insolvency practitioners who will help you chart a course of action best suited to your business circumstances.