How to start Administration

If you want to put your company into Administration there are a number of steps to go through. The process is normally initiated by directors. However it can also be started by the bank if they hold a qualifying floating charge over the company’s assets.

  • How to put a company into Administration
  • Who appoints the Administrator?
  • Do the company’s creditors have to agree?
  • How long does Administration last?

Do you want help to start Administration? Give us a call (0800 180 8440) or complete the form below to speak to one of our experts

Decide to put the company into Administration

Generally it is the directors of a company who initiate the Administration process. They first appoint an Insolvency Practitioner (IP) who will help review the company’s prospects and decide on the best course of action.

This review will involve an evaluation of the company’s financial position. It will require cash flow and trading forecasts to be produced. Administration can only be recommended if it is felt that it will result in a better return for the creditors than simply closing the company.

If the IP agrees that Administration is appropriate they will submit the necessary paperwork to the Court. A Court Order is only required if the company is already in a Company Voluntary Arrangement (CVA) or in Liquidation

Administrator Appointed

The Insolvency Practitioner is then appointed as the Administrator. From this point the company is known as being in Administration and is protected from creditor action. Notice that the company is in Administration must be given to all known creditors and advertised in the London Gazette.

The Administrator will then work with the directors, accountants and relevant staff to understand the company’s affairs. Within eight weeks they must circulate proposals for the company to all creditors. These will include the Administrator’s proposed fees. A creditor’s meeting to agree the proposals and fees must be held 2 weeks later.

If the bank holds a floating charge or debenture over its debt it can overrule the directors appointment and appoint its Administrator. However even then the Administrator has a duty to act in the interests of all creditors.

Creditor’s Meeting Held

The creditor’s meeting is where the proposals for the company are agreed. Normally the meeting must be held 10 weeks from the appointment of the Administrator. However this period could be extended if creditors request it.

The proposals can be accepted, amended and then accepted or rejected. In be accepted the majority of the voting creditors by value of claims must agree to them. The Administrator must then report the outcome of the meeting to the Court and Companies House so it can be added to the company’s public file.

If no agreement can be reached and the Administrator’s proposals are rejected this must be reported to the Court. The Court will then give further direction. However it is likely at this stage that the company will be Liquidated.

Agreed proposals are implemented

Once the proposals are agreed the Administrator is responsible for implementing them. The company’s original directors will retain little or no control of the business. They may only act under the instruction of the Administrator.

The Administrator will send regular progress reports to the creditors, the Court and Companies House. As a minimum this must be done every 6 months until the Administration ends. Further creditor meetings may also be held and/or a creditor committee set up to help keep creditors informed of progress.

How long does Administration last?

Administration normally lasts for up to one year. During this time the company will be restructured, sold, put into a CVA or closed (or a combination of these).

If the Administrator requires more time to complete the process they can ask the creditors to agree to an extension. Alternatively they can apply to the Court for an extension.

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