powerful administration tool

Administration – a powerful & positive tool

Administration is a powerful tool. It is a temporary arrangement whereby insolvency practitioners are appointed by the court to take control of the company.

At a time when the economy is shrinking and unemployment is rising, many of the tools of trade of the insolvency profession exists to minimise the number of failed businesses which simply “disappear” and on the back of that to preserve jobs.

Unless you have chosen an insolvency-related career or you have been unfortunate enough to have experienced severe financial problems in the past, there is a good chance that you will have limited knowledge of what services are available from an insolvency practitioner.

Many people see headlines about large employers “going into Administration” and immediately assume the worst. It all sounds pretty grim and terminal. And some of it is – particularly if business owners fail to take early advice when they face financial difficulty. But the insolvency industry does much more than “bust” companies.

Administration is a powerful tool. It is a temporary arrangement whereby insolvency practitioners are appointed by the court to take control of the company.

During their period of office they look into the viability of the business to see if they can salvage all or part of it. Whilst the company is in Administration it is in a protective bubble, until they find a solution. It is– safe from potential actions taken by creditors, such as bailiffs seizing essential equipment.

Recently the retail group, Peacocks, went into administration. Part of that group is the women’s clothing retailer Bonmarché and this has been sold for an undisclosed sum. Although there will be some job losses, 2400 jobs will be preserved. Historically, the alterative would have been the company simply ceasing to exist and all the staff would have been unemployed.

The outcome of administration varies tremendously. In theory, the administrators could manage the business until it has recovered and then hand it back to the directors. In reality there are usually underlying problems which frequently result in the selling on of the healthy parts of the business. Once no further improvements or sales can be brought about the administrators role is completed and they usually then take on the role of liquidators.

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