Administration - What happens to the employees?
Can the existing directors purchase the business from the Administrator?
Yes. As protection to creditors' much more disclosure about the purchase and circumstances is required if the directors are involved with the acquiring company.
To use an Administration process rather than a Pre-pack Administration would mean that matters are more complicated. It may be that a Management Buy Out is being negotiated. By putting the company into Administration protects the company from any action that might be taken by a creditor.
How does this affect our company bankers?
Your bank will probably have a debenture charge registered with Companies House if there is borrowing by your company (either overdraft or loan). If the bank does have a charge it will be necessary to give 5 days' notice to your bankers prior to the appointment of an Administrator.
In practice, we will make contact with your bankers at an early stage to explain the company position and how this affects the bank.
What about the other major creditors'?
We are required to make contact with the major creditors' to advise them of the company position which includes the basic plan details and the marketing strategy.
How do your fees work in an Administration?
There is a separate pre-appointment fee and Administrators fee. The Pre-appointment fee is agreed with the directors when you instruct us to proceed. The level of this fee depends on the work involved and can be as little as £5000.
The Administrator's fees are agreed by the creditors' and are depend on the work involved. Every case is different and it is difficult to generalise. Administrator's fees are unlikely to be less than £25,000.
How is the valuation of the company worked out?
We will instruct an independent valuation expert to carry out a valuation of the business and the assets of the company. This valuation will take into account the marketing constraints that exist in the circumstances. This valuation would include all the physical assets (plant, machines, vehicles, property, equipment etc.) and non-physical assets (goodwill, brands etc.).
These assets would be valued on the basis of the business continuing rather than a cessation of business and a forced sale.
What marketing of the business needs to be done by you?
We will need to carefully consider a marketing plan to cover the first 2 to 3 weeks of the administration. We will liaise with you in putting this together. The exact details of the plan may involve making a number of confidential approaches to competitors within your industry or other interested parties. Time is of the utmost importance as ideally, we need to secure a sale within the early weeks of the Administration.
Who is in charge of the business once it enters Administration?
We would take charge and responsibility for the business as Administrator. We would need to work with you to put together a trading plan for the business. The Administrator is personally liable for any losses of the business.
What information needs to be provided to creditors'?
There is much detailed information that needs to be disclosed to creditors'. This includes;
- Background to company
- Proposed plan to deal with the company assets
- Details of the purchaser
- Marketing carried out by the Insolvency Practitioner
- Valuations of assets
- Reasons for the failure of the company
How long does an Administration last?
The period of the Administration should not exceed one year. Should there be good reason why this period be extended, it will be necessary for the Administrator to make application to court specifying the reasons.
What happens if a purchaser cannot be found?
If a purchaser cannot be found for the business within a realistic time frame the position will need to be reviewed carefully. If there is no realistic chance that the business or part of can be sold it will be necessary to close the business and sell off the assets for the best possible prices.