Administration is an important process for many businesses. While the term can carry some stigma, understanding why a business may need to enter administration, and the protection afforded from doing so, can help in the long-term.

The insolvency practitioners at Hillcrest Finance have experience in helping businesses throughout the UK handle the process of administration clearly and robustly. While it may not be seen as a positive solution to company finances, our team can see where appropriate administration measures will favour a company, especially if recovery is a viable option.

If you are running a business which may be facing administration, get in touch with Hillcrest Finance today.

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.

Advantages of administration

Administration can prove useful if:

  • The business needs a moratorium on paying debts
  • The business is going to be sold (when compared to liquidation)
  • The business can get rid of historic debt before a sale
  • You want assets to retain value (when compared to liquidation)
  • You want to continue trading

Many businesses will still want to trade during this period. This is referred to as a “trading administration” and typically happens for businesses which would be seen as having a higher chance of recovery. High street chains are a prime example of businesses which become a trading administration. The ability of your business to trade like this will depend on your circumstances.

Disadvantages of administration

Administration can become a problem as:

  • News of administration can harm a brand
  • Administration comes with added costs
  • Control of the company is out of owner’s hands through the whole process

Does administration require a Court Order?

If a business goes directly to a licensed insolvency practitioner (IP), they can appoint an administrator and enter administration without a Court Order. In situations like this, the IP has to carry out due diligence and provide evidence that a company should enter this status, rather than liquidating.

Are there alternatives to administration?

There are other routes a business may be able to take to recover, namely informal arrangements, company voluntary arrangements, or liquidation.

Demystifying administration

Entering administration can seem daunting, especially when the status of the business is seemingly up in the air. That’s why practical advice from administration experts like those here at Hillcrest Finance can help immensely.

To discuss administration and what options are available, call us directly on 0141 478 0862. Lines are open every weekday from 8 am.

Get in touch with us about Administration today