If your company is insolvent, or likely to become insolvent, then it could enter administration. Administration allows the company time to reorganise its affairs or realise its assets, in a more orderly fashion than a closure option.

In order to enter administration the proposed administrator must be satisfied that one of the statutory objectives of administration can be achieved, namely, rescuing the company as a going concern; or, achieving a better result for the company’s creditors as a whole than would be likely if the company were put into liquidation; or finally, for realising the company’s property to make a distribution to the company’s secured or preferential creditors.

The administrator, who must be a licensed insolvency practitioner, will upon appointment take control of the company’s affairs from its directors. Typically, if the underlying business is sound and cash flow allows, the company will continue to trade under the control of the Administrator whilst a buyer is sought for the business and assets. In certain circumstances the sale of the business and assets can be agreed before the company goes into administration, with the sale being completed immediately after the start of the administration, this is commonly referred to as a ‘pre-pack’ sale.

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