What is an Administration? - Definition & Source of law - Benefits & implications
Effects of an Administrators Appointment
An Administration is an insolvency process which is predominately designed to provide a breathing space from creditor actions. The law and procedure relating to Administrations and more importantly the procedure to place a company into Administration is set out at Schedule B1 of The Insolvency Act 1986.
It is incredibly quick and easy to place a company into Administration, particularly if there are no Floating Charge creditors. The company can be placed into Administration within a matter of hours. It is a simple matter of filling out a few forms, which need to be sworn at a solicitors office. Those sworn forms are then filed in court and the company will then be in Administration. The forms are merely stamped by the Court Clerk and given a reference number and therefore there is no need to see a Judge.
The main defining effect of an Insolvency Administration Order is that it freezes creditors actions.
This means that once the company is in Administration:
- landlords cannot distrain on your company's assets
- creditors cannot pursue court judgments against your company
- winding up petitions cannot be issued against your business
- bailiffs cannot seize assets or take "walking possession"
- H P companies cannot recover their assets
That "freeze" on creditors enforcement procedures provided by the Administrator's appointment gives directors the time needed to consider alternatives and to put a rescue plan in place. The process is, therefore, quite often an interim step to achieve a later objective such as a company voluntary arrangement. In many instances an Administration can, however, stand on its own without necessarily there being a later insolvency process.
If there is a danger that creditors are seeking to take enforcement action against a company, Administration can be a very useful tool to freeze creditors action to allow the directors time to act in the best interests of the company and the creditors as a whole. If you would like to discuss Administrations and the procedure to follow to place a company into Administration please telephone 01326 340 579 to discuss the matter with one of our Insolvency Practitioners.