Is administration a good idea?
Any mention of administration and people view it as a negative step when, in fact, it can favour a business, especially if we want the business to recover. Administration may help when:
- You want the business to operate as normal
- You need help restructuring
- You don’t want to go into liquidation
In cases where a business can’t figure out what steps to take, having an administrator step in would be the best option.
What criteria qualifies a business for administration?
Typically, administration happens if a business is about to become insolvent due to threats from creditors and wants to avoid insolvency. At the same time, the business has to show signs that it can still make money and have assets at hand to help with payments and restructuring.
Are businesses entering administration protected?
When businesses enter administration, an appointed administrator comes in to view the status of the business and see what can be done. During this time, the business is free from creditors trying to take legal action. The idea behind this is that it helps reduce stress on the business and gives the administrator a real chance of finding out where things went wrong before providing their suggestions on how to help the business.
What recommendations would an administrator provide?
Administration can result in any number of changes, dependent on the expertise of the administrator and their team. Some common recommendations would be:
- Restructuring through re-capitalisation
- Finding new forms of finance
- Getting a business in a position to sell to a new owner
- Selling assets
- Demerging the company to pay off debts
The level of recommendations will be based on what administrators think is the most logical approach.