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Administration Orders

Company 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 and the protection of the Court with the following objectives:

Rescuing the company as a going concern
Achieving a better result for the creditors as a whole than would be likely if the company were wound up without first being in Administration

or, if the Administrator (a Licensed Insolvency Practitioner) thinks neither of these objectives is reasonably practicable

Realising property in order to make a distribution to secured or preferential creditors.

While a company is in Administration creditors are prevented from taking any actions against it except with the permission of the Court. An Administrator may be appointed in the following two ways:

By an Order of the Court, on application by the company, its directors, one or more creditors, or, if it is in liquidation, its liquidator.
Without a Court Order, by direct appointment by the company, its directors or a creditor who holds comprehensive security of a type which qualifies him to make such an appointment.

Company Administration can be an extremely effective procedure precluding creditors from taking enforcement action against the company and provides breathing space for the Administrator to implement measures designed to meet one of the purposes listed above. In particular, the procedure provides an opportunity for the survival of the business either by sale or restructuring (thus saving jobs).

An Administrator's powers are very broad and include powers to carry on the company's business and realise its assets. Upon his appointment, an Administrator must prepare proposals for approval by the creditors setting out how he intends to achieve the purpose of the administration.

On conclusion of an Administration a company may be returned to the control of its management, enter in into Creditors Voluntary Liquidation, be dissolved or if a Company Voluntary Arrangement has been agreed during the administration, the arrangement may continue according to its terms.

“Pre-pack” Administration

A pre-pack is a deal for the sale of an insolvent company’s assets. Most commonly it is used in conjunction with the Administration procedure. The deal will usually have been agreed before the Insolvency Practitioner is appointed, but will be executed by the Insolvency Practitioner shortly after appointment. Any “pre-pack” Administration can only proceed under guidelines set out in Statement of Insolvency Practice number 16 (“SIP 16”).

If the conditions are appropriate, a pre-pack can be advantageous for all involved, and can be the best way of extracting value from a dire situation. Pre-packs mean a business can be sold without negative publicity, which could destroy the value of the business and lead to loss of customers and staff. Pre-packs are also used where there is a lack of available funds to keep the business trading while the Administrator looks for potential buyers during the insolvency proceedings.