Can a company survive administration?

It’s a common misconception that putting your company into administration is the end for your business. When in fact, company administration gives businesses with a significant amount of assets the opportunity to pause, allowing them to have the space they need to figure out what decisions should be made.

 There are many businesses that have gone through the administration process and have come out the other side stronger than ever. However, it’s important to recognise that this isn’t the only option, and we would always advise you to get in touch with the experts at FA Simms, and together, we can decide if company administration is suitable for your company.

What is company administration?

As mentioned, you might decide to put your company into administration if you can’t afford to pay the debt owed – this means that you’re insolvent – but your business has the prospect of future profitability with reasonably predictable cash flow.

Once in administration, you will be protected from any legal action by creditors (people or organisations that you owe money to) while a rescue plan is put in place. Furthermore, nobody will be able to apply to wind up your company during the administration process.

It’s important to recognise that this protection will not exist once the administration process has ended.

With this in mind, you might find administration is an appropriate route for you if you feel like your business is struggling to pay its debts. However, if you feel your company doesn’t have many assets, and you see no future for your business, it might be Creditors’ Voluntary Liquidation (CVL) is a better option than administration.

Do you need to appoint a professional administrator?

Yes, as this is a legal process, you must appoint an administrator – a fully-licensed Insolvency Practitioner, like those at FA Simms. During the entire administration process, all control of the company and its assets will be handed over to the administrator – this is in the best interest of the business, to ensure the steps are carried out correctly and legally.

The main goal of the administrator will be to rescue viable parts of a business in financial difficulty and increase return for the business’ creditors.

What happens during administration?

Once appointed, the administrator will write to your creditors and Companies House to let them know that the process is starting and they have been appointed. At this point, a notice will also be published in The Gazette.

The administrator then has eight weeks to create a statement explaining their plan of action. This should then be sent to creditors, employees and Companies House – all of whom will be invited to attend a meeting so they can approve or challenge the plans.

What are the potential outcomes of the administration process?

At the end of the administration process, the administrator could decide to:

  • Carry on trading with its debts, but in a manageable position. This is called Company Voluntary Arrangement (CVA).
  • Sell parts of the business to pay off the debts and then carry on as a new company. This is called pre-packed administration.
  • Pay creditors by selling your assets as part of a Creditors’ Voluntary Liquidation (CVL) process and then closing your company.
  • If there are no assets to sell, then close your company through a liquidation process.

When will the administration process end?

The administration process ends when:

  • The administrator decides that the aim of the process has been achieved.
  • The administrator’s appointment ends (this will happen automatically after a year, however, it can be renewed if necessary).

Do you want to discuss company administration?

If your business is facing financial challenges and struggling to pay its debt, then get in contact with the friendly team at FA Simms. We are here to support, guide and advise you every step of the way.

Scroll to Top