Administration - FAQs

The company and its directors.

Administration is a type of formal insolvency process aimed at providing protection to a company which is struggling financially. In an administration the company will be protected by the courts from creditors pursuing legal action. A licensed Insolvency Practitioner must be appointed as Administrator to manage the company's affairs through the administration process.

A pre pack administration involves a relatively quick process whereby the insolvent company is sold to a third party (new company) along with its assets clearing the old company from all liabilities. The procedure is managed by a licensed Insolvency Practitioner who will act on behalf of the court as administrator.

The administrator is responsible for managing all company affairs, business and property whilst in administration. It is their duty to either rescue the company as a going concern, achieve a better result for the company's creditors as a whole than would be possible if the company was wound up or release property in order to make a distribution to one or more secured or preferential creditors.

The administrator will have eight weeks to distribute proposals to creditors detailing their appointment and the circumstances of the company being placed into administration. The administrator will also outline what outcome they anticipate and may call an initial creditors meeting with a view to having the proposals accepted.

The process should be completed within 12 months, although this can be extended by the consent of the creditors or by the court. At Ideal Corporate Solutions we will aim to act on everything as soon as reasonably practicable to resolve issues quickly and effectively.

The initial creditor's meeting should be held within 10 weeks of the date that the company entered administration, and the creditors must be given at least 2 weeks notice of the meeting. At the meeting the proposals will be discussed giving creditors the opportunity to accept, reject or modify the detail by a majority vote. If a proposal is rejected a report is sent to the court for further directions. Once proposals have been accepted the administrator will manage the company's affairs as agreed by the creditors.

When a company enters insolvency proceedings, all of the company's liabilities are paid or stay with that company, with the exception of the employees Transfer of Undertaking & Protection of Employment (TUPE) claims, which will transfer to the new company if there is a going concern sale. Therefore the new company will have a clean slate.

Yes, providing no fraudulent activity has taken place.

Secured creditors whose debt is secured against assets of the company are subjected to contractual terms and conditions and will be regarded as preferential creditors. Secured creditors are likely to see a greater return in pre pack administration than can be expected in other insolvency procedures.

Unsecured creditors will be paid following full settlement of secured and priority creditors. It is the responsibility of the administrator to forward proposals and liaise with all creditors regarding the company's situation.

In the event of the business being sold as a going concern all employees will maintain their rights and be transferred to the new company. However, legal advice should be taken to ensure employees are treated accordingly.

Ideal Corporate Solutions will advise in each individual case what we believe is the most appropriate solution for your company. Pre pack administrations are used in cases where if they are not sold the business will inevitably cease trading. Through the pre-pack route the business can be sold quickly reducing negative attention surrounding the financial situation and continue to trade under a new company whilst retaining customer, suppliers and employees.

In the event the bank is a secured creditor, the administrator will work with them to resolve the company's debt. Some banks may allow the new company to keep the existing business accounts however, Ideal Corporate Solutions will assist you through this process and advise on opening new bank accounts and arranging facilities.

There can sometimes be a financial pressure in a pre-pack administration case which Ideal Corporate Solutions understands. Timescales largely depend on previous planning and the co-operation of those involved, however we will act quickly and effectively to complete the process.

The administrator has to send the secretary of state a report on the conduct of all directors who were in office in the last 3 years of the company's trading. The secretary of state has to decide whether it is in the public interest to seek a disqualification order. Any application is heard and decided by the court.

Examples of conduct that may lead to disqualification include:

• Continuing to trade to the detriment of creditors at a time when the company was insolvent
• Failure to keep proper accounting records in accordance with the provisions of the Companies Act
• Failure to prepare and file accounts or make returns to Companies House
• Failure to submit tax returns or pay over to the crown tax or other money due
• Failure to co-operate with the administrator

Notification of a decision to apply for a disqualification order will be sent to the last address you provided to Companies House or the administrator. The application for disqualification has to be made within 2 years of the date of administration, unless the court extends the time.

The administrator will make a report to the court on the conduct of the directors and send a copy to them. The directors will have the opportunity to give the court explains or reasons for their actions – but may do so by a statement of truth (a written account of the relevant facts which is sworn on oath or affirmed, usually before a solicitor). There may be also statements of truth from other people (such as the company's bankers, accountants and creditors) presented as evidence to support the case for or against the directors. The court will then decide whether the conduct makes the directors unfit to act in the management of a company and, if so, for how long they should be disqualified.

At any stage in the proceedings you may give an undertaking to the secretary of state that has the same effect as a disqualification order and will put a stop to the court proceedings.