When a company encounters financial difficulty it can be put into administration by a floating charge holder or the directors/shareholders.

In the run up to the administration, and during it, the company is protected by a moratorium meaning that no party can commence or continue with any legal action including winding up petitions, the recovery of goods or landlords accessing property.

A company can only go into administration for one of three reasons, they are:

  1. To rescue the company as a going concern;
  2. To achieve a better result for creditors as a whole than in a liquidation scenario;
  3. To realise the company’s property in order to make a distribution to its preferential or secured creditors.

When a company goes into administration the plan may be for the administrators to run the business, or to sell the business, or both.

If the administrators run the business this could be with a view to turning its fortunes around and handing it back to shareholders as a trading company or to sell its assets including goodwill so that the business continues in a new entity but without the burden of the historic debt.

When an administrator chooses not to run the business but to sell it immediately upon entering administration this is called a pre-pack administration because the marketing, legal work and sale agreements have been completed on the run up to administration and retrospective creditor sanction to the sale is sought.

Contact us if you would like further information and assistance regarding any aspect of administration for your business. There is no charge for doing so and it is without obligation.

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