Administration

Administration puts the company under a licensed insolvency practitioner and creates a legal barrier that stops creditors taking or continuing action. It is the strongest protection available to a company under pressure, and it buys time that nothing else does.

The administrator tries to rescue the company as a going concern, or failing that to get a better result for creditors than a straight winding up would.

Pre-pack administration

A pre-pack is a sale of the business and assets agreed before the administrator is appointed and completed immediately afterwards. The trading business moves to a new company — often one connected with the existing directors — and the old company’s liabilities stay behind to be dealt with in the administration.

Pre-packs are lawful and are used because speed preserves value that would otherwise disappear over a weekend. They are also tightly regulated: where the buyer is connected with the company, either the creditors have to approve it or an independent evaluator has to report on it first, and the administrator has to disclose the detail to creditors.

Employees generally transfer with the business, along with most of their accrued entitlements.

Is it realistic for you

Administration suits companies with real assets, a trading operation worth saving, and the money to pay for the process. For a small company with no assets and no ongoing trade it is usually not proportionate, and a CVL is the sensible route.