What Does Going Into Administration Mean?

Posted in Guides
12 Jul, 2012

Mounting debts and crippling creditor pressure is something most businesses have to deal with at some point in their existence. As a result a lot of business owners have had to consider the possibility of going into administration. It may sound like a scary concept given the experience of some firms such as Woolworths, who went into administration and never came out. This however should not be a discouragement to you. Administration in itself is not actually a bad thing, as the aim is to manage the debts of the struggling business in order to pay its creditors as quickly and efficiently as possible. To accomplish this purpose some parts of the business might be closed down and some people might be made redundant. It is not always the case that the company is closed off. This tends to happen when the administrators are called in quite late and the financial situation is very difficult to tackle. It should be noted that administration only applies to large firms, and not small businesses.

How Does The Process Start?

Administration can be promulgated by the managers of the business or by the creditors following legal proceedings. During this period the company cannot come under further legal action. The administrator can only be a licensed insolvency practitioner and must be agreed to by the court. The administrators take control of the firm and will run it on behalf of the creditors, but with full consideration given to the owners. What the administrators aim to do in essence is to make the most of a difficult situation. It is in their dedication to their objection that administrators will sometimes have to sell the business in order to pay off the debts and prevent at least a portion of the staff from losing their jobs.

What Happens After Administration?

The idea behind administration is to get the company back on its feet. The business owners will have to be determined to ensure this happens, as some administrators may prefer to sell the business in their bid to help the creditors. But once this process is over and assuming you still have your company, you would need extra capital to pick up the momentum. Your suppliers and customers will be uncertain what your position is so a lot of work would need to go into marketing and publicity. If your company kept running during the administrative process then it makes continuation a lot easier. Otherwise you would need to get your workers back on the job and working at maximum efficiency from the start. Your company would need a fresh cash injection to spur on the wealth generation.

What Are The Alternatives To Administration?

As mentioned earlier, one of the reasons why some businesses close down during administration is because it took too long to plug the leak. Having accurate cash-flow projections will help a business better prepare itself against financial upsets. ‘Experience is the best teacher’ is an often used quote, and that’s where we come in. Business Recovery specialises in helping companies manage their debts properly, thus preventing the need for administration. Our experts will analyse the true value of your assets, the real extent of your debts, and come up with the best way to move forward. The aim of Business Recovery isn’t simply to pay your debts off, but to do so with the smallest number of casualties. We want your business doors to remain open, and we want your staff to remain employed and our service is free. Calling us now gives your company a better chance of avoiding liquidation or legal action and the other problems associated with volatile debts. We believe your business deserves better and that’s what we’ll do.

Have a look at our visual guide on How Administration works


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