Administration
Administration is an insolvency procedure which is intended to help your company survive as a going concern, although it can also be used as an alternative to liquidation if it will result in a better outcome for creditors. It's suitable if your difficulties are the result of a one off or temporary interruption to your cash flow, your underlying business is sound and you have a reliable cash flow.
Administration can be initiated by the directors of a business, its shareholders or any of its creditors. It's wise to make sure the company's bankers, who are often the largest creditor, are happy with what's being proposed. Administration 'ring fences' a company's assets which means that creditors can take no action to recover their assets or their debt without the consent of the court.
This gives a company a breathing space during which it can, for example, cut costs or sell off subsidiaries or surplus assets which allow it to return to financial health. An administrator has wide ranging powers, including the power to appoint or remove directors. He or she has to prepare proposals for approval by creditors advising how the purpose of the administration is to be achieved and the purpose must generally be achieved within 12 months of appointment.
Sometimes, a deal is done either immediately before or shortly after an adminstrator is appointed - a so-called 'pre packed adminstration' or 'pre-pack'. There are sometimes very good reason for using this route but you must take expert advice from a licensed Insolvency Practitioner and a lawyer who specialises in insolvency law.