What is administration and pre-pack administration?

Administration is a business rescue tool governed by the Insolvency Act 1986 [the Act]. It provides an insolvent company with a period of statutory protection from creditors, allowing the Administrator, working with the directors, time to formulate a strategy going forward. Getting the company into Administration does not require an application to Court and can be done very quickly, thereby getting early protection from pressing creditors. The objectives of the Administration are laid down in the Act and can include the rescue of the company as a going concern or the sale of the company’s business and assets.

Pre-Pack Administration is arrangement under which the sale of all the business and assets is negotiated with a purchaser [can be a third party or the existing management team, or a combination of both] prior to the appointment of an Administrator, and the Administrator effects the sale immediately on, or shortly after his appointment. Such a Pre-Pack Sale does not require the approval of the court or the creditors although there are safeguards in place to ensure that such a sale is both legal and transparent. Done properly, the process gives continuity and maintains the value in the business, as well as preserving jobs.

Expert advice

Embarking upon an Administration is a big step for any board of directors, no matter what the size of the company’s operations. As the process involves the transfer of full executive powers to an Administrator, it is essential that the strategy is fully understood at the outset and capable of implementation. Accordingly, prior to formal appointment, we at Insolvency-Online, will have fully explained to the directors all available options and likely outcomes. Quite often, before entering into Administration, it will be necessary for us to assist in the preparation and fully interrogate short-term profit and loss and cash-flow projections. In addition, we will carefully explain the law surrounding this procedure and how it impacts on all stakeholders. Sometimes, we will assist the directors at meetings with secured lenders whose support for the process is often necessary at the initial stages.

In cases where an early sale of the company’s business and assets is envisaged, we will be recommending to the Board professional agents that we have worked with in the past, to drive forward the sales process. Throughout this period we will provide advice on an ad hoc basis to the company including creditor negotiation where necessary.

Of all the formal insolvency procedures, “time is of the essence” in the setting up of any successful Administration. At Insolvency-Online we will provide you with a free confidential consultation with one of our licensed insolvency practitioners at a convenient time and location.

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