What are the advantages and disadvantages of an administration?
Administration is a formal insolvency procedure which must be carried out by a licensed insolvency practitioner. The process protects limited companies from creditor pressure, and can allow the continuation of normal business operations, giving your company the best chance of recovery and an opportunity to restructure.
The procedure has many benefits to you as director, shareholders, and creditors – but it is important to understand all its implications.
Purposes of administration
The process of Administration must achieve one of three statutory purposes.
- Rescuing the company as a going concern.
- Achieving better results for the company’s creditors as a whole, than would be possible if the company were wound up without first being in Administration.
- Realising property and assets to make a distribution to one or more secured or preferential creditors.
Advantages of an administration
By entering your company into administration, it can benefit from many of the proceses’ advantages, including but not limited to:
- Protection against creditors
Your company will be given an automatic moratorium when it enters administration, preventing creditors taking any further enforcement action such as obtaining County Court Judgements (CCJ), or issuing Winding-Up Petitions. This gives us as administrators and you as director time to regroup and look at the best course of action for all parties involved.
- Maximised return for creditors
It will be our role to ensure the creditors receive the best possible outcome from the process. A sale of the business or assets can be enhanced where there is continuity of trading, or alternatively the pre-packaged sale of the company can achieve better realisations than a sale after a cessation of trade, meaning administration can provide a better return to creditors than entering straight into a liquidation procedure such as a CVL.
- Company restructuring
Administration provides the opportunity for significant restructuring under the guidance of a licensed insolvency practitioner like ourselves,, enabling us to make the necessary changes to either save your business or make it more appealing to potential buyers. As administrators we have a duty to leave the business in an improved position, if working towards the statutory purpose to rescue the business as a going concern.
- Pre-pack administration
In some circumstances, your business can continue to trade through a newly registered or existing company. This will mean a pre-arranged sale of the business and its tangible assets to either a third party, or associated company, which is managed by the appointed administrator. This is a process known as a pre-pack administration and it enables you to keep control of the business and trade to continue uninterrupted.
- Preserves Jobs
Employees are able to keep their positions as the business is able to continue trading, and their jobs preserved in accordance with Transfer of Undertakings (Protection of Employment) (TUPE). Either under the same or different directorship of the new company. - Continuity
Pre-pack administration can ensure that assets are sold to the new company seamlessly, minimising disruption to the business and deterioration of the brand’s reputation. - Continuing company brand
A pre-pack administration may allow the new company to continue trading using the former premises and may even be able to keep the full use of its former trading name. However, there are restrictions and this should be considered carefully. - Directors retain control
A pre-pack administration allows directors to keep control of the company and continue trading until the sale of the business which will occur on the day the insolvent company enters into Administration.
- Preserves Jobs
- Exit strategy considerations
When your company is coming to an end, you should understand and consider the implications of the possible exit routes out of administration, which include.
- Continue to trade
If the company is deemed viable, and restructuring has been effective, the Administration will end and control will return to the directors, meaning that it can resume regular trading activities. - Company Voluntary Arrangement (CVA)
If the company is deemed viable, and restructuring has been effective, the Administration will end and control will return to the directors, meaning that it can resume regular trading activities. - Creditors Voluntary Liquidation (CVL)
A CVL will see the company exit from Administration and be formally wound up and closed, allowing the directors to walk away from the limited company, with all unsecured debts written off.
Find out more Company Voluntary Arrangements
Find out more about Creditors Voluntary Liquidation
The exit route the company takes will be determined by the individual circumstances of the company, its future viability and ability to make a distribution to its creditors.. In addition to the above exit options, the Company could also be placed into Compulsory Liquidation or be dissolved immediately following the end of the Administration period.
- Continue to trade
Disadvantages of administration
When considering an administration, it is important to understand the implications, including but not limited to:
- Publicity
Administrations are public procedures and clients can become aware that your company has entered into the process. However, this would be the case with any insolvency procedure that your company enters into.
- Investigations
Just as with any other insolvency procedure, an administrator is obliged to examine the actions of the you, as director.
- Cost
The cost of an administration depends on the size and complexity of the job, and can be dependent on the amount of time your company is in administration for.
- Employee entitlements
Unfortunately, some employees could be made redundant. Even if you form a new company through a pre-pack administration, not all employees may be TUPE’d over to the new company.
How our services can help your company
If you’re concerned about your company’s financial position, our licensed insolvency practitioners are qualified to handle all insolvency procedures, including administration. Our experienced initial advisors can discuss your company and assess all the appropriate insolvency options available.
- Repay your company debts in a payment plan via a Company Voluntary Arrangement (CVA)
A CVA is a payment plan between a company and its creditors that allows you to restructure your company’s unsecured debts, while continuing to trade, by making affordable monthly payments over a fixed period. We start by assessing your company’s financial position, determining a realistic repayment amount. These terms are then proposed to your creditors and if approved, your company enters the repayment plan. When in place, all interest and charges are dropped and creditors in the arrangement cannot take further legal action. The process lasts for up to 5 years and on successful completion, any remaining unsecured debt in the arrangement is written off.
- Close your company down via a Creditors Voluntary Liquidation (CVL)
A CVL is a liquidation procedure for companies that are insolvent. The process will formally close and liquidate your company, ceasing its trading operations, realising any assets, and removing the threat of creditor legal action. If your company has employees, they can claim for redundancy and other statutory entitlements through the government’s Redundancy Payment Service (RPS). The process is final and irreversible. Once completed, your company’s unsecured debt will be written off and the company is dissolved, allowing you, the director, to move on.
- Close your company down and start again via a pre-pack liquidation
A pre-pack liquidation is a type of CVL where the sale of your company’s assets is arranged before liquidation, allowing business operations to continue seamlessly under the purchasing company. The company name may be reused, and employees can transfer under TUPE. Contracts and essential agreements can also be included as part of a sale, ensuring minimal disruption to your business operations. This process eliminates the unsecured debts of your previous company, providing a fresh start free from previous unsecured liabilities.
How to get in touch with us: The next steps
- Speak with our initial advisers
Make contact with our team, via phone, filling in a form, or online chat. We will assess your circumstances and, if suitable, arrange a free consultation with a consultant to discuss your company’s situation. - Initial assessment
During the consultation, we will advise if an insolvency procedure is the most appropriate route forward or whether alternative solutions better suit your company’s problems. - Formally engage with Wilson Field
If there is an appropriate insolvency solution, we will confirm the necessary steps to start the procedure and will issue you with the relevant documentation for you to formally engage us.
In summary
An Administration is a process that must be carried out by a licensed insolvency practitioner. The procedure aims to maximise a return to creditors while protecting your company from legal action and rescuing it as going concern. If recovery isn’t viable, we can help you explore the alternative insolvency options such as a formal liquidation, which will see your company wound-up with the sale of its assets, providing a return to creditors and giving you a chance to walk away from the company.
The process can have many positive outcomes, including but not limited to:
- Protection against creditors
- Maximised return for creditors
- Company restructuring
- Multiple rescue options
- Formal repayment plans
- Pre-packaged sale
Case Studies
JS Security
Kelly Burton • Other • Administration
All 42 jobs have been saved at a Cheltenham security firm after it was bought out of administration.
Joint administrators Kelly Burton and Lisa Hogg of insolvency and business turnaround specialist Wilson Field were appointed to JS Security on 10 February after HMRC threatened to wind-up the company because of accumulated tax arrears.
The company, which operated from Old Station Drive in Cheltenham, has now been bought out of administration by existing, and associated company, JS Facilities Group Limited of Cheltenham, saving all 42 jobs.
The business will be operated by the existing management team lead by managing director John Search. The total value of the deal is undisclosed but it includes the business and the assets of the Cheltenham based company.
Kelly Burton, director and insolvency practitioner at Wilson Field, which has bases in Leeds and Sheffield, said;
“Unfortunately, the security services sector is very competitive which leads to hourly rate discounting and small margins.
“JS Security accumulated tax arrears which threatened its existence. After discussing the situation with the director, I am pleased that we have found a solution which will see the business continue to trade and also all 42 employees’ jobs transferred to the new company.”
JS Security was appointed the official security provider at Gloucester Rugby in June 2013 for two-years and also won the contract to provide matchday security for the four Rugby World Cup matches at Kingsholm Stadium in September 2015.
The contracts covered match day security, including the hospitality areas, car park security and any additional security requirements.
JS Facilities Group Limited has been running for 15 years and operates throughout Gloucestershire specialising in security services for sectors including commercial, logistics security, construction, events, key holding and alarm response.
Services include remote video monitoring, control room services, lone working monitoring, security guarding, door supervisors, mobile security patrols, event security and first aid training.
ARB (Sound Vision Light Power) Limited
Kelly Burton • Leisure & Hospitality • Administration
Wilson Field has secured a new future for a Banbury headquartered events management company, which boasted clients including Crufts, Tour of Britain and Virgin London Marathon after it was bought out of administration.
ARB (Sound Vision Light Power) Limited was established in September 2014 and specialised in event hire including providing audio visual solutions equipment, hire and installation.
The company, which traded from Coton Cottage, Chacombe near Banbury, called in administrators from Sheffield-headquartered Wilson Field for formal insolvency advice.
The company, which has an impressive client list and relied solely on sub-contractors as and when needed, suffered VAT and HMRC issues as a result of a period of illness.
Kelly Burton and Lisa Hogg from Wilson Field were appointed as joint administrators on February 20 and concluded a pre-packaged sale of the business and assets for an undisclosed sum to ARB Motors Limited, lead by the same management team.
Kelly Burton, director and licensed insolvency practitioner at Wilson Field said:
Wilson Field was brought in to look at the situation of the business.
The focus on the company had diluted during a period of illness of one of the two directors. A debt was due to HMRC and a repayment proposal was rejected resulting in the need to protect the business and assets via a formal insolvency procedure.
The pre-packaged sale means the business, which was an established player in event management at large scale events, has a bright future moving forward.
The loss of a major employee’s input through illness can harm an organisation and it is important for businesses to seek help should this arise. Timing is essential to keep focus on the business.
ARB has combined experience of more than 100 years and provided hire equipment such as indoor and outdoor PA systems, single and double-decker commentary units, street sound vehicles, exhibition TVs, stage lighting and mobile power in both primary and secondary distribution.
Catering Butchers
Kelly Burton • Leisure & Hospitality • Administration
A previously successful, family-owned and managed catering butchers saw its turnover eradicated by the Covid 19 outbreak.
Following a review of all the options with the team at Wilson Field, the directors decided to appoint WF as Administrators.
Kelly Burton, director and insolvency practitioner at Wilson Field added:
“Like many over the pandemic, unfortunately there were some difficulties encountered as the business struggled to keep up its strong sales. However, we are continuing ro release the assets for the benefit of the creditors.”
Due to a lack of funding, the business unfortunately ceased to trade, however, the Administrators have managed to secure the debtor ledger and a sale of the remaining tangible assets, for the benefit of creditors.
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