Administration is a formal insolvency procedure and a company is deemed to be ‘in administration’ while the appointment of an administrator of the company has effect.

A person may be appointed as administrator of a company:

by an Administration Order of the High Court

by a holder of a Qualifying Floating Charge

by the Company or its directors

The administrator of a company must perform his functions with the objective of:

Rescuing the Company as a going concern

Achieving a better result for the Company’s creditors as a whole than would be likely if the Company were wound up

Realising Property in order to make a distribution to one or more secured or preferential creditors

Administration is a process which is first and foremost designed to rescue the business. Closure of a company should really be the last resort. The administrator’s job is to review the business to establish if the company can continue trading whether that be for a matter of days or, in some circumstances, months. While the company continues to trade most administrators are effectively running a marketing operation to search for a buyer and keeping the business going creates the time in which to find one. Frequently however, keeping the business trading is difficult due to the costs of doing so, difficulty obtaining credit and lack of support from funders. This creates a pressure on many administrations to achieve an early and quick sale.

If the company can’t be kept as a going concern, in many cases the main task of the administrator is to maximize the value of the assets for the benefit of the creditors. In almost every case the best way to do that is to try to sell the business for the best possible price in a reasonably short time scale. Frequently this can involve what is known as a ‘pre-pack sale’.

A pre pack administration is an arrangement under which the sale of all or part of a company’s business or assets is negotiated with a purchaser prior to the appointment of an administrator, and the administrator effects the sale immediately on, or shortly after, his appointment. These have become controversial procedures and MKB Law’s extensive experience in this field allows us to guide the parties through the process or give advice to aggrieved creditors.