Your Guide to Administrations and Pre-Pack Administrations
We understand that financial difficulties can arise in any business, no matter its size or industry. When these challenges become insurmountable, Administration can be a valuable tool to help rescue and restructure a struggling company.
What is administration?
When a business is facing serious financial pressures, an Administration can provide much needed breathing space. Our team of experienced specialists will support directors, lenders and stakeholders to restructure, recover and provide the best outcome possible for the business.
An Administration is a formal process which can be initiated by a creditor, the directors of the Company or a floating charge holder. It’s designed to protect the business of the Company from further creditor action whilst the Insolvency Practitioner is appointed as Administrators. This allows the Administrators to make negotiations and continue the day-to-day operations of the business whilst exploring options. Ultimately the Administrators will look to either trade the business until a sale as a going concern can be achieved or close the trade of the Company and sell any assets individually.
How can Xeinadin help with administrations?
We work closely with businesses to provide tailored solutions to their situation, offering a wide range of services such as pre-pack Administration, trading Administration, business and asset sales, creditor and stakeholder management and exit strategies.
Seeking advice at the earliest signs of financial difficulty can significantly improve the options available to directors and the business. We understand that your business is important to you and we want to find the right outcome for you so early engagement allows us more time to assess all of your options, protect assets and explore rescue or restructuring options.
Our experienced team of insolvency practitioners will collaborate closely with you to provide clear, practical guidance at every stage of the Administration process. We will take the time to understand your business, the challenges and how we can tailor a strategy to improve the outcome.
Administration has the following benefits
01
Immediate protection from your Company’s creditors
02
All ongoing legal action is stopped
03
Trade can continue whilst you assess your options
04
The Company still has the option to propose a rescue plan, CVA or Liquidation
05
Provides the opportunity to restructure the business into a more profitable form
03
Trade can continue whilst you assess your options
Administration provides immediate protection from recovery action being taken by Company creditors such as your suppliers or HMRC. This buys you time to determine the best strategy for you and your business.
Whilst it can be a tough decision to choose to place your Company into Administration, the immediate protection provided often makes it by far the best way to save the business.
Appointing an administrator
In most cases, the Administration process is started by the Directors filing a Notice of Intention to Appoint an Administrator. This form is a simple document that we will arrange to complete and file at Court for you. As soon as the Notice of Intention has been filed your Company is protected from all ongoing and potential legal and recovery action for a period of 10 business days.
You are only required to disclose the Notice of Intention to the Company’s charge holders (who would usually be your factoring company or a bank you have a loan with) together with any creditors who are threatening legal action. Because the Notice of Intention is not in the public domain your suppliers, customers and staff will not need to be told at this stage that you have started the Administration process. This provides us the opportunity to work with you to decide on how best to proceed to save your business.
How administration works
During the 10-day period whilst your Limited Company is protected, we will work with you to understand your objectives for the business whilst also establishing your Company’s financial position and the value of its assets. Based on this we will agree with you whether the Company should continue to trade, go into Administration (which may be as a Pre Pack) or take a different insolvency option like CVA or Liquidation.
When we have been appointed as Administrators, we will seek to realise the Company’s assets. When doing this, we are required to obtain the best price we can for the Company’s assets as a whole.
The Directors have the option to make an offer to buy back the business and assets free of the Company’s historic debts alongside any unrelated party. The Administrator will consider any such offer against any other offers received following a period of marketing of the Company’s assets. The offer that is in the best interests of creditors (taking into account amount and any deferred payment terms) will then be accepted and proceeded with.
Should the best offer received be from a connected party, then in order to proceed the connected party must obtain an Evaluator’s Report. This Report is the responsibility of the connected purchaser and will confirm that the offer is the best available to the Estate. On receipt of this the Report must be submitted to the prospective Administrators who will then be able to proceed.
As in a liquidation, an Administrator has statutory duties to comply with as part of the Administration. One such duty is to investigate the financial position of the Company to ensure that all acts taken by the Directors have been in the best interests of the Company and then the creditors. The Director’s duties are covered in length HERE. Should you have any queries in relation to this, please do not hesitate to call our team of Insolvency Practitioners to discuss.
Pre-Pack administration
A Pre Pack Administration gives the same protection from legal action provided by Administration whilst also taking proactive steps to save the business of the Company. A Pre-Pack Administration can be a practical solution when a business is facing severe financial difficulties so can continue seamlessly throughout the Administration process after a rigorous marketing process to ensure best value has been obtained.
We provide clear, compliant and commercially focused advice on Pre-Pack Administrations, supporting business owners, lenders and professional advisors.
Benefits of a Pre-Pack administration
01
Provides immediate protection against recovery action by creditors
02
Protects the value of the business of the Company
03
Ensures the business continues seamlessly without disruption to customers or staff
04
Allows restructure of business into a more profitable form
02
Protects the value of the business of the Company
03
Ensures the business continues seamlessly without disruption to customers or staff
What is a Pre-Pack administration?
A Pre-Pack Administration is the process where the sale of all, or part, of a business is agreed prior to the appointment of Administrators, following a rigorous marketing process to locate the best offer, and then complete immediately upon, or shortly after, the Administrators’ appointment.
This approach can help to:
- Reduce disruption to trading
- Preserve goodwill and customer relationships
- Protect jobs and maintain supplier relationships
Pre-Pack Administrations are governed by strict regulatory and ethical standards and must demonstrate that the outcome is fair and reasonable for creditors.
When is a Pre-Pack Administration appropriate?
A Pre-Pack Administration may be considered as an option for a business when:
- The company is insolvent or close to insolvency
- There is an underlying business viability but unsustainable debt
- The value of the business would be damaged by any interruption to trade
- Speed and confidentiality are critical
- Alternative rescue or refinancing option are no longer viable
- The business has insufficient cash flow to enable an Administrator to trade the business whilst a third-party buyer is sought
We will collaborate with you to assess whether a Pre-Pack Administration is the correct procedure ensuring you understand both benefits and risks before any decision is taken.
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Whether you have a clear goal in mind or are open to exploring possibilities, we’re at your service to assist you.
FAQs
Administrations:
An administration is a formal insolvency process aimed at rescuing a financially distressed company, maximising returns for creditors, or realising assets. An insolvency practitioner takes control of the company’s affairs to achieve these objectives.
A company can enter administration through a court order, the company directors, or secured creditors holding a qualifying floating charge. The process involves appointing a licensed insolvency practitioner as the administrator.
The administrator’s role is to manage the company’s affairs, either to rescue the business, achieve a better outcome for creditors, or realise assets. They work in the best interests of creditors as a whole.
The moratorium is a legal protection that prevents creditors from taking legal action against the company without the court’s permission. It allows the company breathing space to devise a rescue plan.
During administration, employees’ rights are protected, and the administrator can either continue trading with the existing workforce or make necessary staff changes.
Pre-Pack Administrations:
A pre-pack administration involves negotiating the sale of a company’s assets before officially entering administration. The sale is completed shortly after entering administration, ensuring business continuity.
Pre-packs offer a swift transition, maintaining business continuity, preserving relationships with customers and suppliers, and often resulting in higher employee retention rates.
While pre-packs offer benefits, they can raise concerns about transparency, as the sale is often negotiated before other stakeholders are informed. This has led to efforts to improve disclosure and creditor involvement.
Creditors’ approval isn’t usually required for the pre-pack sale itself. However, the administrator must provide a report to creditors explaining the reasons for the pre-pack sale and detailing their valuations and considerations.
In some cases, the existing directors may form a new company to purchase the assets. However, this must be done in compliance with legal and regulatory requirements to ensure fairness to creditors.
Our Corporate Recovery advisors specialise in:
Our Corporate Recovery advisors specialise in:
Meet our Corporate Recovery Directors
Alessandro Sidoli
Area Managing Partner & Licenced Insolvency PractitionerCorporate RecoveryManchester
Alan Fallows
Partner & Licenced Insolvency PractitionerCorporate RecoveryManchesterChris Brindle
Partner & Licenced Insolvency PractitionerCorporate RecoveryBlackpoolFrancesca Vivace
Partner & Licenced Insolvency PractitionerCorporate RecoveryBlackpoolIan Williamson
Partner & Licenced Insolvency PractitionerCorporate RecoveryBlackpoolAllan Cadman
Director & Licenced Insolvency PractitionerCorporate RecoveryManchesterJessica Barker
Associate Director & Licensed Insolvency PractitionerCorporate RecoveryManchesterRelated Insights
