| This is a court led procedure which involves an Insolvency Practitioner taking control of a company which is or is likely to become insolvent. Whilst the Order is in place, the Company is protected from any action by its creditors.
Under the Administration option, it is possible for the company or its directors (or a creditor, like the bank) to apply to the court to put the company into Administration through a streamlined process.
But the law requires that any creditor provider (like a bank or lender), with a floating charge, as well as various other specified parties, be contacted and the aims of the administration be discussed and approved. The charge holder will need to give permission for the process to go ahead otherwise five days clear notice is required.
The purpose of an Administration Order is normally to preserve the business and/or provide a better return to creditors than otherwise. The Enterprise Act 2002 has streamlined this procedure making the process simpler and quicker and, as a result, often cheaper.
Currently the "Pre-Pack" administration sale is a very popular method. The company prepares itself to enter administration and sell its assets to a new company or to an existing 3rd party company. This is a very powerful, far reaching process that can protect the business, usually the old company is liquidated afterwards. |
