Company In Administration

Smowball | 14:30 Mon 16th Apr 2018 | Business & Finance

15 Answers

When a company goes into administration is there a set time frame in which they have to find a buyer, or does it vary depending on the size of the company? My friends just been told the news re who she works for and they say they are confident of finding a buyer but won’t say when by. I don’t really know the legal process.

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Flonska

This might provide answers to some of your friend's questions.

https://www.realbusinessrescue.co.uk/company-administration/what-happens

Smowball

Question Author

Hmmmm - that article(thankyou) says it can take up to 8 weeks. She’s under the impression that they needed a buyer in 10 days or so.

Flonska

Many factors may affect the sale process e.g. nature, type and size of the business - whether it can be sold as a whole or in parts - what state the order book is in etc but essentially, the Administrator will attempt to achieve the result as a "going concern" for the best price and as quickly as possible. Your friend and other employees should direct their questions to the administrator.

Flonska

The time limit of 8 weeks applies to the administrators who have to submit their proposals by the end of that time for approval. The business can be sold within that time - if a buyer is found.

Smowball

Question Author

It seems a very complicated process , and one which a company wouldn’t take lightly.

Flonska

The reality is that if the company went into administration as its trading position was threatened. If it is not able to continue, it will be broken up and the assets sold. In that event, as an employee, your friend has rights e.g. may be able to claim arrears of pay, pay in lieu of notice depending upon how long s/he has been employed . S/he really should speak to the administrator who will know the precise position as it affects that particular company.

AKMild

An administrator takes over the legal responsibility for running the company from the directors. The administrator is a court-appointed official and has to act in the best interests of the company's creditors. That can, and often does, mean selling the company either as a going concern, or as a 'pre-pack', which often means the sale of the company to the original owners free of some, or all, of its debt, which has to be written off by its creditors. A pre-pack can be viewed as a way out for the original owners to the detriment of the company's unsecured creditors (which may indeed be the case) but it is often the only way for the company to be saved, albeit as a different legal entity. Alternatively, the administrator may decide that the best result for the creditors would be the piecemeal sale of the company's assets, and when there's nothing left to sell then the company is placed in liquidation and wound up. If the assets are long term (e.g. a bank would have long term loans), an administrator may decide to continue running the company on reduced overheads whilst those assets are realised.

The outcome all depends on the type of business it is, whether it has any realisable assets and how happy the creditors are to wait if needs be. The administrator is personally liable to the court, so his/her choice of action to put to the creditors is not a responsibility taken lightly.

Unfortunately, in the majority of cases, administration is a step towards liquidation. Your friend should ask the administrators to keep the staff fully informed, not because they can influence the process (unless they are creditors), but because clear communication can help prevent misunderstanding which can then descend into unpleasantness all round. Administration is a difficult time for employees (I have been in that situation) and ultimately it will probably (but not definitely) mean eventual redundancy.

Smowball

Question Author

I will pass on all this info, and thanks everyone for taking the time to give such detailed replies. Much appreciated

Flonska