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
Silcox Coach Company
Kelly Burton • Automotive • Company Voluntary Arrangement (CVA)
Pembrokeshire-based Silcox Coach Company, which operates school transport as well as local bus services, has been placed into administration today.
Despite attempts by administrators from Sheffield-based Wilson Field to secure a buyer with various interested parties, the 134-year-old company, which operated a fleet of 65 coaches and buses from its base in Pembroke Dock, has now ceased trading.
Insolvency practitioners Kelly Burton and Joanne Wright from Wilson Field Limited were appointed by shareholders after the company experienced financial difficulties and as a result all 92 staff jobs have been made redundant.
However, in the region of 50 staff have been re-employed by Edwards Coaches of Pontypridd who have been granted the local authority contracts previously operated by Silcox.
Kelly Burton, director and insolvency practitioner at Wilson Field said:
“Silcox Coaches was a fourth generation bus and coach operator and over the years provided various forms of transport services latterly focussing local authority community bus routes, school services, coach hire and coaching holidays.
“The company had an excellent reputation within the industry, the local community and its clients. Initially there were a number of parties interested in buying the business and assets and we had hoped to save all the jobs of the loyal workforce. Sadly, despite our best efforts none of these came to fruition. On the positive side, Edwards Coaches of Pontypridd have re-employed approximately 50 of those staff.”
As well as office accommodation in Pembroke Dock, Silcox also occupied a small travel office in Tenby and a large bus and coach compound near the offices in Pembroke Dock.
Edwards Coaches is the largest family owned coach company in Wales employing over 500 staff and operating 260 vehicles. It currently operates National Express coaches from Haverfordwest departing daily to Cardiff, Heathrow, Gatwick London and various other destinations plus transportation for over 8000 students to school or college each day from bus depots all over South Wales.
It also operates coach holidays for 80,000 passengers a year across the UK and Europe and operates The Edwards’ Red Dragon coach which is the official carrier of the Wales Rugby Team.
Travellers who have booked and pre-paid for a holiday with Silcox may be entitled to a refund and should contact either Bonded Coach Holidays (BCH) e-mail: bch@cpt-uk.org or The Confederation of Passenger Holidays UK (CPT) Tel: 020 7240 3131.
Print On Solutions Limited
Kelly Burton • Service Agency • Administration
A Leeds print company has been bought out of administration saving all 54 jobs.
Print On Solutions Limited was set up in 1999 years ago and went from start-up business to the largest envelope overprinter in the UK with offices in Leeds and Bury, 12 litho presses and six digital presses.
Administrators Kelly Burton and Joanne Wright from Sheffield business turnaround experts Wilson Field were appointed joint administrators on 11 April after the company, based in Century House, Holbeck, ran into financial difficulties following an ongoing dispute relating to a significant contract.
The directors took early advice and the business was sold to new company WEPOS Limited as a going concern saving all 54 employees’ jobs.
Kelly Burton from Wilson Field said:
“Following discussions with the directors, the business was sold to WEPOS Limited as a going concern, safeguarding all 54 employees’ jobs. The new company will offer the same service and standards and will operate under the same management team.”
In 2003 Print On expanded by moving to a 12,000 sq ft, purpose-built factory in Leeds, designed to offer the business a state-of-the-art platform for growth.
The expansion of the group was through strategic acquisitions and mergers of envelope manufacturers. Tower Envelopes in Bury merged with Print On in 2010 and became the Lancashire division.
Derwent Castings Limited
Kelly Burton • Metals • Creditors Voluntary Liquidation (CVL)
Unsecured creditors owed money by a Derbyshire manufacturing company which went into liquidation are to receive a higher than the expected dividend of 60p in the pound.
A total in excess of £128,000 is due to be distributed to unsecured creditors of Whatstandwell-based Derwent Castings Limited, whose claims totalled over £192,000.
The company, whose roots date back to the 1940s, had traded profitably for a number of years but in late 2013 / early 2014 saw the cancellation of its largest sales contract which represented 70 per cent of its turnover.
Bosses at the company, which employed 16 staff including three directors, struggled to attract replacement business and had to drop prices. Further business was lost as a result of foreign competition.
Sheffield’s insolvency specialist Wilson Field was called in as liquidator and worked with the creditors’ committee of Derwent Castings Limited to secure the positive dividend.
Andy Wood, associate director and insolvency practitioner at Wilson Field said:
“Dividends for insolvent companies are generally low, or nothing, for a variety of reasons – cost of staff redundancies, difficulty collecting outstanding invoices, selling assets in a forced sale situation, selling specialist assets which have limited appeal to purchasers, deteriorating or perishable assets, as well as other costs involved.
“However, thanks to a very positive relationship with the creditors committee, I am delighted to return a healthy dividend to the unsecured creditors in the region of 60p in the pound.
“The supply chain is often greatly affected by a liquidation and in this case we have been able to help creditors.”
Derwent Castings Limited was incorporated in August 2002 and specialised in iron casting from the five-acre Derwent Foundry site at Whatstandwell near Matlock.
However, the iron founding operation at Derwent Foundry was first introduced back in 1946 by Wragg & Hawksley which produced cast iron pipes for the water industry.
In 1950 the foundry was acquired by WH Davis & Sons Ltd to supply castings for their railway wagon building business. Following a management buy out in 1984, the company was renamed Derwent Foundry Ltd and following its closure in July 2002, was bought by its present owners and renamed Derwent Castings Ltd.
Amongst jobs carried out on site were moulding using loose pattern and modern air setting (boxless) sand systems; metals work using the latest in electric induction melting producing a wide range of grey, SG and alloy irons; an independent Namas approved test laboratory, finishing, pattern making and machining facilities.
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