Administration Orders

Administration orders were first introduced by the Insolvency Act 1986 as a mechanism for protecting companies from their creditors while a restructuring plan is completed. The Administration mechanism was subject to significant changes after the introduction of the Enterprise Act 2002 which allowed easier access to the process for companies in financial difficulty.

Administration orders can be sought by the company, its Directors or one of the creditors.

A company in administration may continue to trade while a plan is formulated to achieve one of the following:

i.	Rescuing a company as a going concern, or
ii.	Achieving a better result for the company's creditors as a whole than would be likely if the company were wound up (without first being in administration), or
iii.	Realising property in order to make a distribution to one or more secured or preferential creditors.

Following on from the legal jargon it’s worth considering some practicalities. Experience shows that there is likely to be some form of business continue after the administration, whether it’s within the existing company or a different company.

The likelihood is that a company entering into Administration will either have its valuable assets sold on or leave Administration in to a Company Voluntary Arrangement (“CVA”).

The key cost to an Administration process is where the business continues to trade through Administration, not only incurring its operating costs but also the costs of the Administrator’s team.

This is one reason why the concept of a pre-packaged (“pre-pack”) sale has developed. The pre pack sale is where an off-market sale is lined up prior to the start of the Administration process and then the Administrator is appointed to conduct the sale.

Any such sale must be approved by a professional valuation agent who should take into account all relevant factors in arriving at that valuation. This valuation is a cost of the Administration process.

Where the pre-pack has been questioned is where the sale of the assets is to a connected party rather that a third party. However it is worth noting that such a sale if conducted following the correct procedure does not fall foul of legislation.

Most sales of assets by an Administrator will be involve the appointment of a solicitor to prepare the sale paperwork and this again is a cost of the Administration.

Simply contact us for free, no obligation advice.

Our team of professional and friendly advisors will guide you through this difficult time, providing you with advice on all the options.

Frequently asked questions concerning Administration Orders

How long does an Adminstration Order take to get in place?

What is a protection order?

I’m a Director/shareholder can I buy assets back from the Administrator?

What role do my secured creditors play?

What will it cost?

Do they work?

What will the court allow?

How long will it last?

Who runs the company?

I’m a Director, can I still be involved?

Who else can appoint an Administrator?

Can any secured creditor appoint an Administrator?

I’ve heard about a pre-pack, what’s this?

I’ve got a personal guarantee, what happens to this?

What happens at the end of the administration order?

What is an Administration Order?

A company protection order from the courts.

How long does it take to get in place?

As little as a few hours.

What is a protection order?

No creditor can take enforcement action against the company unless the court sees it proper to do so.

I’m a Director/shareholder can I buy assets back from the administrator?

Yes, but you must pay a fair value.

What role do my secured creditors play?

They must be consulted and agree to the plan of action. Remember always take a lender a solution and not a problem.

What will it cost?

The costs are not extreme; most importantly trading during the administration will need to be funded. A specific estimate will be given.

Do they work?

If a clear plan is established they are highly successful.

It should be remembered that an Administration Order is a facilitator and is used as part of a defined plan involving a number of parties and stages.

What will the court allow?

Exceptional circumstances where a specific creditor is suffering unduly, a court application is required.

How long will it last?

To a maximum of 12 months, exceptionally extended to 15 months.

Who runs the company?

The Administrator. He or She must be a licensed insolvency practitioner.

I’m a Director, can I still be involved?

Company Directors can appoint an Administrator. In this case typically the company will continue to be run by the Directors under the Administrator’s supervision.

Who else can appoint an Administrator?

Creditors, shareholders or a secured creditor can appoint as well as the Directors.

Can any secured creditor appoint an Administrator?

No, this will need to be a fixed and floating charge holder. This will usually be registered at Companies House.

I’ve heard of a pre-pack, what’s this?

A pre-pack or pre-packaged administration order comes from the old style Administrative Receivership favoured by banks and finance houses.

A deal for the sale of the company’s assets is put in place prior to the passing of the Administration Order.

Only once the administration order is filed in court is the deal signed off between the buyer and the Administrator.

I’ve got a personal guarantee, what happens to this?

Every circumstance is different, but any plan to lenders must account for this, with the aim of minimising exposure under any guarantee whilst remaining within the legislation guide times.

What happens at the end of the administration order?

The company could be:

Sold via a share sale
Enter a Company Voluntary Arrangement and continue trading
Sell its assets
Enter into Liquidation
Be struck off