Are you new to going into administration process and want to get familiar with the exact procedure and the terminologies used in this? This guide will help you to learn how correct execution can help your company to be saving grace. Before we delve deep into the discussion, let’s first see what are the points of discussion.
In this article, we will focus on the following:
- What Is Going Into Administration?
- Outcomes of Going Into Administration
- How much time does it take to Execute?
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What Is Going Into Administration?
By going into administration, we mean that our company is going under the management of IP (Licence Insolvency Practitioner). Once the company is under the care of IP and has gone into administration, you are protected from the creditors who intended to threaten you for the payment of the debt and might take legal action against your company.
In this phase when a company is carrying out business under the administration of IP, they do analyse if the company is capable enough to carry out the business successfully in the future as well. This is followed by a restructuring period to ensure the company’s business growth in future as well. Moreover, the appointed IP will take the control of the company to manage the business from this point. The current directors will no longer be handling the management in order to carry out the business.
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Outcomes of Going Into Administration:
This process is often voluntarily initiated by the directors or the shareholders of the company. This happens when the business experiences functional or financial difficulties. A Qualifying floating charge holder is allowed to initiate this process like banks or other lenders that are a secured option for the business.
If we talk about the possible consequences that might occur after going into administration, it is important to know that it is not a process that can be taken into consideration for long term solutions to your business challenges. In other words, this time is used to let the business breathe and utilise this phase to explore future directions for business growth. Some other possible outcomes include the following:
- The company will thrive to grow after the restructuring process
- Sometimes administration can call it the end of the business if there is no possibility of going forward in carrying out the business.
- Your company will be given protection from the threatening creditors to whom you owe payments.
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How much time does it take to Execute?
The process and its time both depends on the stage at which the business is being carried out. It can take a few months or maybe a year, it all depends on the circumstances. However, IP ensures that the administration does the duties in the shortest possible time span and finishes the task as soon as possible. This makes the swift administration more popular than the slow ones.
Moreover, the time to send the proposal to the creditors is 8 weeks or less. This proposal is generally based on the detailed plan of the administration to achieve certain business goals within a given time limit. This is a must for the administrators to ensure that the creditors are satisfied with the new remedial plans in order to rescue the company and offer better returns to the creditors.
Ways Of Going Into Administration:
There are three possible ways through which a company can be placed into administration. They are listed below for you:
- The shareholders or the directors of the company can apply and request the court to put the company into administration.
- The floating charge holder is allowed to appoint the administrator.
- The shareholder or the director can also appoint the administrator.
Further, we will discuss the details of the procedure when the director or the shareholder decides to appoint the administrator. In this case, the purpose of placing the companies in administration must be very clear. It could be any one of the following listed options:
- To consider the company rescue from worse business circumstances.
- The intention of getting a better performance for the creditors.
- The purpose of property distribution with the preferential creditors could be one or more than that.
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Any one of the above-mentioned objectives is allowable to consider the administration process. However, there are certain terms and conditions that are needed to be fulfilled before you can actually start the process. This included the following:
- The administer receiver must not be in the office.
- There should not be a winding-up order for the company.
- There is no winding-up petition.
- The company is not gone through the process of administration in the last 12 months.
- The company is not considered a failed company in terms of business in the last 12 months.
After it is ensured that the company is meeting the conditions and the set criteria, it is permissible for the directors or the shareholders of the company to appoint the administration. The first step before appointing the administrator is to have a meeting of the directors and the shareholders. The required paperwork will be followed by the court filing process. After this, the administrator will be immediately appointed to save the company from the crisis.
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The Bottom Line:
Now that you have developed a better understanding of what is the meaning of going into administration, we can sum up the discussion by saying that, it is advantageous for businesses that are suffering from functional or financial challenges in order to carry out the business. This process allows the business to breathe and look for possible directions to use in the future. Hence, saves the business to call it the end and gets out of the market.
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Disclaimer: This article is written to provide general information based on what is the meaning of going into administration.
