How do businesses with cash flow problems avoid closure?

A lot of times when we advise businesses in financial distress they are looking for an outcome that allows them to continue trading, it’s our goal to provide a solution that best fits each business individually and provides the most positive outcome possible.

To help illustrate this process, I thought it would be useful to highlight one of our recent cases;

We were approached to aid a software company producing programmes for the education sector; they had been trading for six years and business had been good in this time.

Recently they had won a contract to provide local schools with a new software product; if it was successful it would be rolled out nationwide providing an excellent and extremely profitable opportunity for the business. However the directors noticed that despite this, turnover was down. Focus had been taken away from the main core of the business while the new software was developed and so other areas had been allowed to slide.

The new software product had taken longer than anticipated to produce and had increased in cost meaning that problems with cash flow began to arise resulting in a build-up of debt that needed to be paid immediately.

We assessed the business’s situation and worked closely with directors and their accountants to ascertain all possible solutions. After thorough consultation we advised the best option to allow the business the time and relief from its creditors that it needed was to implement a Company Voluntary Arrangement (CVA).

With the CVA in place the pressure of debts on the company was removed, they were able to complete their software trial successfully and begin nationwide distribution as a result; even managing to become profitable enough to end their CVA early with a lump sum payment.

If advice is not sought and solutions found, situations like these can very easily progress into failed businesses; some only require time to get back on their feet, out from under the pressure of debts caused by poor cash flow.

Have you come across clients in this very situation? What are the biggest financial concerns facing your clients right now? Please drop me an email at a.fisher@focusinsolvencygroup.co.uk with your experiences, I would be happy to reply with any advice you might need for your clients.

Winding Up Petitions

Have you had a client issued with a Winding Up Petition (WUP) against their company?

In these situations it is extremely important to seek professional advice at the earliest opportunity in order to protect your client’s company and their interests as much as possible.

Due to the costs and implications involved in a WUP, issuing one to a company suggests that the creditor is very serious about recovering any money owed to them and probably sees this as a last resort after breakdowns in the business relationship. HMRC have been very quick in recent months to issue WUPs. Any creditor with a debt of £750 or more can move to issue a WUP.

A WUP, issued by HMRC or another creditor, is by far the most damaging and serious course of action that can be taken and will result in its closure and assets sold/employees dismissed if left to run its course in court with no defence or strategy/ proposal suggested as an alternative.

If the company is viable going forward and is to be saved then immediate action is essential! The very act of presenting a petition is likely to result in the bank account being frozen, which can cripple trading.

If the debt can be paid in full then this should be done immediately unless the debt is disputed, in which case legal representation is essential. Otherwise there may still be time to propose alternatives to the WUP such as a Company Voluntary Arrangement (CVA) or Administration. These are powerful tools to help rescue a company from collapse.

It is vital to seek professional insolvency advice by this stage to ascertain if the WUP can be halted and alternative arrangements made to pay the debt or risk the company being handed over to the Liquidator.

There may also be personal liability implications to the director or board members of a company issued with a WUP if personal guarantees have been made within the business or they are implicated in trading whilst insolvent.

If any of your clients have been issued with a WUP then do not hesitate to get in touch with us and we can work together to save the employees jobs and rescue the company.

Why you need a cash flow forecast

Profits are important and an obvious priority to any businesses; however cash flow management is the integral building block to the success and growth of that business.

Many business owners will put a lot of their time and interest into their profit and loss sheets but may overlook the important information that can be gleaned from the cash flow forecast. Profit and loss sheets do not contain all the information needed to predict how the business will do in the future, if it has the potential to grow and how it might overcome any problems. Even the appearance of a healthy profit and loss sheet could be masking a poor cash flow and papering over the cracks of a future problem, potential business distress, and eventually insolvency.

Profit is of course the difference between income and outgoings; however it only becomes income when a client pays, not when they are invoiced. You know when the client is due to pay but what if they miss the payment date meaning you do not have the money to pay your own invoices? How would your business cope with consistent late payers or a slow sales month? Will you have the surplus cash to invest in your next project or buy new equipment?

The answers to these questions can all be predicted by a well put together and concise cash flow forecast. It is no guarantee of future business performance as there a lot of different defining factors in cash flow management and each business is different, but it will give you the best possible idea of when and how money is coming into and going out of the business, when there might be surplus cash or gaps to fill. The more often you do a cash flow forecast, the more accurate it should become as you learn to read the information it provides.

No matter a business’s size or current position, cash flow forecasting is essential to the day to day running and in turn profitability of the business. They are not only vital for your own planning but will come in to play when seeking any kind of funding or investment. If you can present a well thought out cash flow to an investor or bank you are proving how much you understand your business and how invested in it and committed you really are.

Cash flow forecasts are usually composed on an annual basis but can be done 6 monthly or more often if required, depending on your businesses needs you could even do them daily.

If a cash flow forecast has flagged up the need to find extra finances in a certain month to bridge a gap then it can help you plan for this in advance rather than at the time. Businesses trying to secure funds ‘same day’ will come across as unprofessional and unorganised.

Use your cash flow forecast to run likely scenarios of future trading conditions and events and how your business would fair. You can then put contingencies in place to deal with them if and when they arise.

A good cash flow forecast is an essential document, treat it with high regard and seek professional and impartial advice immediately if predictions indicate cash flow problems or businesses distress.

For more advice on what to do if you are suffering cash flow problems, get in touch today or ask your questions in the comments section below. You should consult your own accountant regarding cash flow forecasts but we can also point you in the right direction for advice on writing and maintaining a cash flow forecast.

Factoring and Invoice Discounting

Factoring and invoice discounting are both ways that a business can release money tied up in their accounts receivable i.e. outstanding invoices, effectively selling the invoice to a factoring company in order to have money available more quickly.

Contrary to popular belief the use of factoring and invoice discounting is not always a sign that the business is in trouble, although it is an effective tool in improving cash flow for a struggling business that may otherwise be in trouble due to late paying customers. The main reasons that these options might be considered are outlined below.

Reasons factoring and invoice discounting may be considered

There could be many reasons that a business may require money from an invoice sooner than the debtor has agreed to pay; but the main reasons are:

• Business start-up finance – This is a flexible way to get finance that will enable the business to get off the ground.
• Business growth – The ability to put money instantly back into the business enabling it to grow and progress.
• Cash flow problems – Cutting out the wait between invoicing and receiving payment which enables the business to continue forward.

 Differences

The main difference between factoring and invoice discounting is the control of the sales ledger and responsibility for collecting outstanding debts. With factoring, the factoring company takes over the sales ledger; invoice chasing and credit control; and customers will settle debts directly with them. With invoice discounting the business remains responsible for issuing and collecting on invoices.

Factoring

A factoring company would create an account which the business could draw from against its invoices, when an invoice is issued 80-90% of that invoice will be made available for the business to use, you are not obliged to take every amount available. When the customer settles the invoice the remaining 10-20% will be credited to the account less any fees and interest. Since customers will deal directly with the factoring company when settling invoices it is difficult to hide their use, however some do offer a ‘transparency’ where it will appear that all correspondence comes directly from your business. However, debtors are used to dealing with factoring companies and as such this rarely causes problems.

Invoice Discounting

Invoice discounting is very similar except that since the business is still responsible for debt collection it is the business that will pay the factoring company once the invoice is paid. This means that customers would be unlikely to be aware of the third party.

Fees

Fees for these services are usually dependant on the type of agreement you take and other elements such as annual turnover, the amount the business is borrowing against the invoice and the length of time it takes your customer or the business to pay. There are many different types of agreements and many difference companies that provide them. If you are interested, it would be best to do some research, gain some independent advice and get more than one quote.

If you have any questions or need ny advice, please feel free to contact us or leave a comment below.

Business Insolvency: Frequently Asked Questions

We are currently in one of the most difficult and unpredictable financial climates that businesses have ever had to endure and the fear of insolvency is very real. However making the decision of talking about the problem is one that is often feared by many directors and business owners typically because they still don’t understand what Insolvency Practitioners are there for and hence remain afraid of them.

Quite simply, a Licensed Insolvency Practitioner is a professionally qualified person with the necessary expertise and experience to deal with and help businesses in financial difficulty.

As Licensed Insolvency Practitioners Focus Insolvency Group specialises in helping and advising all types of businesses whether they are a large limited company or a small sole trader; and in whatever situation they may find themselves in. The following are details of common questions on which our clients have sought our advice:

Q. A lot has been heard on the news about businesses being affected by the downturn in the economy, what should I be watching out for?

A. Increasing overdraft levels, banks reducing or eliminating funding, unpaid bills and no provision for accrued liabilities particularly to HMRC. Sole Traders or Partnerships can find the owners threatened with bankruptcy, whilst limited companies can find themselves having winding up petitions against them for non-payment of debt. Debt collectors and bailiffs can effectively stop businesses trading by taking the remaining working capital or the assets of the business.

Q. What do I do at the first signs of trouble?

A. If debts cannot be paid then it is essential that an Insolvency Practitioner is involved to look at the various options available. The act of taking professional advice at an early stage will mitigate any losses to creditors and protect directors personally. Failure to take advice and implement appropriate procedures can make directors potentially personally liable for the company debts as a result of the wrongful trading provisions in the Insolvency Act 1986.

Procedures can be implemented immediately to protect the company from creditor action including bailiffs and winding up petitions. Once the pressure is off, we can sit down and look at the company trading position and see if it is viable to continue trading going forward. It may then be possible to make a proposal to the creditors, which although may not pay them back all their liabilities will be better than the company being placed into Liquidation and employees made redundant. The company will then be free from debt in 5 years.

Q. Will going bust always be the answer, with the loss of jobs?

A. No. the strategy at Focus Insolvency is to always look at rescuing a viable business and save jobs. Naturally, this is as long as the business is viable going forward and we have management support. We can provide FREE initial advice by sitting down with the business owners and seeing what is available to the creditors perhaps by way of monthly contributions and formulating a proposal to creditors for rescue.

Q. My business has a lot of debt and I do not wish to continue trading. There is a buyer for the assets but he is not willing to take on all those debts, what can be done?

A. An option is to put the company into Administration and sell its assets to an interested buyer. The money received will then be used to pay creditors (after deducting costs). An Administrator only sells the assets of the company not the liabilities and this is far more attractive to a potential purchaser and can be the best result for all rather than Liquidation.

Q. How can I pay for Professional help if my business is struggling?

A. As funds are tight, it is essential that you obtain a FREE consultation from a Licensed Insolvency Practitioner to discuss the options available. Any formal insolvency procedure to rescue or wind up the business will involve costs that are generally paid out of asset realisations.

Remember that legal protection from creditors is available, and it is likely that creditors will accept less than full payment over a period of time given the financial position of the business.

Focus Insolvency Group welcome personal and business enquiries direct and also offers a Professional Partners referral facility to advisors who need help with their clients. If you can identify with anything within this blog for yourself or your client, then it is important that you act immediately, do not be afraid of seeking our advice.

If you have any opinions or questions about this blog, please leave a comment below or get in touch

image from freedigitalphotos.net

Rent Quarter Day; a Threat to Business Survival

Yesterday was rent quarter day for a lot of businesses, a very testing time and an unfortunate indicator to the success or failure of a lot of small companies. With rent, VAT and staff wage worries, a lot of businesses could be forced into administration before the year is out.

Usually businesses will pay 3 month’s rent up front for the next quarter on their commercial properties but the current financial climate means that they are having to make significant changes in order to meet the payments.

Leading insolvency trade body, R3 President, Lee Manning comments:

“Quarter day will always present a challenge to struggling retailers. Some of their leases were agreed during the good times and will have many years to run at very high rents. Negotiating with landlords is key to staving off insolvency, although of course Directors must take care to avoid wrongful trading with regard to all of their creditors. More businesses are attempting to pay rent on a monthly basis or even negotiating turnover linked rents to help them manage their cash flow more effectively. This is more likely to apply to newer leases however.”

The rise in internet sales along with a poor trading climate has seen some 21,000 job losses on the high street since the start of the year due to business insolvency including big names such as Clinton Cards, Game and Peacocks.

Although retail sales were up in May by 1.4%, a poor April due to wet weather and reduced fuel sales in the wake of panic buying from the threatened tanker driver’s strike; has damaged a lot of companies.

Research by R3, using the Bureau van Dijk Fame database; has shown that 26% of UK businesses are in the ‘caution’ or ‘high risk’ band when it comes to companies that are likely to fail in the next 12 months.

This research yet again brings to light the need to seek professional advice before problems get out of hand. Administration and liquidation doesn’t always have to be the outcome for a struggling company if advice is sought at the first sign of trouble. Even getting advice before there is anything to worry about by having your businesses’ health checked over may bring to light ways to avoid any potential struggles in the future and preserve your trading strength.

Focus Insolvency Group are a firm of licensed insolvency professionals and can provide you with free impartial advice. Get in touch or leave a comment below.

Options Available to Struggling Limited Companies – Round-up

Welcome to our round-up blog concluding our series on ‘options available to struggling companies’. If you want to catch up with any of the series so far please see the ‘related blogs’ links at the bottom of this article.

We’ve covered a lot of information over the past six weeks so we’ve brought together the most important points of process and each of the options a struggling company could have available to it. The most important thing to remember is that the sooner you seek professional advice, the more of these options will stay open to you.

One of the first things you need to quickly establish is if your company could be insolvent so take our quick test to find out. Even if you pass the test with flying colours it is still a good idea to seek advice as there might be improvements you can make that could see your business doing even better.

A business health check should be considered a must no matter if you think you might be struggling or not. Even if you’re company is not classed as insolvent; but you’re feeling the pressure, there is usually some turnaround advice that can be implemented to ease the problems and get things back on track. An independent advisor can often see problems and ways to help earlier than directors who are involved in the day-to-day running of matters.

If you think your company might be insolvent then you need to start making some important decisions with the help of an insolvency practitioner, remember that all initial advice will be free of charge so weighing up your options isn’t going to make things worse, it can only ever improve the situation.

One of the most important questions you will likely be asked when deciding what insolvency option best suits your company is do you want to continue trading and attempt rescue as the current company? The next is to ask if the company is able to be rescued. The answers to these along with other aspects of your business (e.g. assets and liabilities) will determine what option suits you best.

Company Voluntary Arrangement (CVA) – Continue Trading

You want to continue trading and have monthly surplus that you can make available to your creditors. Costs are taken from the monthly payment and the balance distributed to creditors. Any remaining debt the company cannot afford being written off after 60 months.

Administration – Continue Trading

The company is rescued as a going concern, an administrator takes over the management of the company until a buyer can be found to maximise returns to creditors. The company will continue to trade as the same business, you may be the one to buy it back or it may be returned to you if the administrator manages to pay all creditors in full. An independent buyer may be found leaving you free of the business. Costs are met from available assets and not personally by directors.

Pre-Pack Administration – Cease Trading

The sale of the company is agreed before the administration. You may be looking to set up a new company with the assets, workforce and premises of the old one effectively closing the first company (ceasing to trade) and opening a new one. Alternatively the company/assets may have been agreed to be sold to someone else leaving you free of the business. In either case the original company will usually cease trading as a result. Costs are met from available assets and not personally by directors.

Creditor’s Voluntary Liquidation (CVL) – cease trading

 Shareholders decide to wind up the company, and it is passed to a liquidator who will sell the assets and maximise the return to creditors. Costs are met from available assets.

 What Next?

Whichever options you consider is most appropriate to your circumstances it is important to remember that the sooner you seek advice, the more likely it will be that you choose the option you want for your company rather than having an option chosen for you like compulsory liquidation. As the statistic below show, liquidations are on the increase meaning that people are seeking advice for their businesses too late and having to take more extreme courses of action that do not enable the company’s rescue.

Focus Insolvency Group are licensed insolvency practitioners and can offer you free and impartial advice, the sooner you seek that advice the better so contact us with any questions you might have either with a comment on the blog or by phone or email.

 We will return next Monday with a new blog so if you have any feedback or want to see a particular topic discussed then please let us know.

Related Blogs

Is My Company Insolvent?

Business Health Check

Turnaround Advice

About Company Voluntary Arrangements

The CVA Process

Is Administration Right for your Company?

About Creditor’s Voluntary Liquidation

The CVL Process

The CVL Process

Last week we brought you part one of our information on Creditor’s Voluntary Liquidation (CVL), this week we conclude with part 2 – the CVL Process.

You can catch up with any of the blogs in our ‘options available to struggling limited companies’ series by clicking on the links at the end of this blog.

Liquidation Process

Stage 1: Advice and Decisions

An insolvency advisor will help you explore your options. They will discuss the company’s financial position with you, review the company’s viability, financial forecasts and background and explain the various insolvency procedures, such as a voluntary liquidation (CVL), Company Voluntary Arrangement (CVA) or even administration and discuss which would be appropriate for your company.

All initial advice and guidance will be free of charge.

Stage 2: Creditors informed of CVL

Your insolvency practitioner will act as the advising member and proposed liquidator. At this stage all creditors and shareholders are written to and informed of your wishes to put the company into voluntary liquidation.

Stage 3: Creditors meeting

The insolvency practitioner writes to the creditors and shareholders informing them of a creditors meeting. The director(s) act as a chairman and the insolvency practitioner conducts the meeting. In most cases no creditors attend the meeting but if they do, questions may be asked over the cause of the company failure.

A statement of affairs that has been prepped by the insolvency practitioner with the help of the directors is given to creditors at the meeting. The creditors officially agree the appointment of the liquidator at this time. Your insolvency practitioner will be the proposed Liquidator however ultimately the appointment decision lies with company creditors (hence the name Creditor’s Voluntary Liquidation).

Stage 4: Liquidation and asset sale

The liquidation commences properly at this point. The assets of the company are sold, the outcome of this sale is reported to the creditors and if any value is left after the liquidation process, payment is made for settlement of the creditor’s claims.

Once the company is in liquidation, your role as a director would cease and your involvement from thereon would be minimal.  You will have to pass over any company books and records and complete a director’s questionnaire regarding your role within the company.

After CVL

After the company is liquidated you do still have the option of being a company director, there are however some strict rules around the reuse of a company name and restarting the same business. Professional advice should be sought in the case of a ‘Phoenix Company’.

If you are planning to set up a new company and feel the old company’s assets are of benefit to your new venture then you will be given the opportunity to make an offer for any assets providing it reflects the valuation figures.

Otherwise, you will be free of the company debt and able to move out without the burden.

What Next?

If you would like any help or advice with decisions on liquidation or any of the other insolvency and turnaround options we have covered in this series then remember that Focus Insolvency Group are here to offer you free and impartial guidance. Get in touch today.

Next week we will be gathering together everything we have discussed in our ‘options for struggling limited companies’ series so far so you can see all the choices in one place.

If you have any questions or feedback please get in touch or leave a comment below.

Related Blogs

Is My Company Insolvent?

Business Health Check

Turnaround Advice

About Company Voluntary Arrangements

CVA Process

Is Administration Right for your Company?

About Creditor’s Voluntary Liquidation

Options Available to Struggling Limited Companies  – Round Up

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About Creditor’s Voluntary Liquidation

Welcome to our latest blog in this series about the options available to insolvent limited companies. We are a couple of days late this week due to the Jubilee Celebrations; we hope you had a really great extra-long weekend.

You can catch up with the rest of the business insolvency series in the posts linked at the bottom of this blog.

We conclude our look into business insolvency with part one of two blogs about Creditor’s Voluntary Liquidation (CVL). Part 2, the CVL Process will be published this coming Monday.

If the results of your Business Health Check aren’t very promising and you think that continuing to trade might be just too much for you to handle then CVL is something you might want to look into.

 What is a Creditor’s Voluntary Liquidation?

Creditor’s Voluntary Liquidation is referred to by a number of other names, CVL, voluntary liquidation, business bankruptcy or simply just liquidation.

Sometimes a company is overwhelmed by crippling debt, it is not able to trade out of cashflow problems and does not have enough money to pay its debts as and when they fall due. In these circumstances the company is insolvent and the only appropriate course of action is for the directors to cease trading and seek professional advice.

A voluntary liquidation is the most common way for directors and shareholders to deal voluntarily with their company’s overwhelming debts.

A voluntary liquidation would stop demands from company creditors and allow the company to write off 100% of its debts. It would also enable the directors to close the company as soon as possible.

If you have been experiencing pressure from creditors such as bailiff action or a winding up petition you can still put the company into Voluntary Liquidation. Once your insolvency practitioner has given notice to the company’s creditors, any bailiff action against the company assets is void and therefore they tend to put all action on hold pending the appointment of a Liquidator.

When might a CVL be appropriate over other forms of insolvency and turnaround advice?

With a voluntary liquidation the company will cease to trade, its assets are realised (sold) and employees dismissed.

Where it may be possible to trade out of the situation, or continue in business, other insolvency procedures such as company voluntary arrangement (CVA) need to be considered. It is for this reason that directors should contact a licensed insolvency practitioner who can guide them through the options.

Voluntary liquidation is most appropriate where:

• The company is insolvent (use these three quick tests to find out if your company may be insolvent)
• A CVA is not appropriate
• The company does not appear to be viable even if restructured
• The directors do not feel they have the finances or determination needed to rescue the company

Advantages of CVL

Voluntary liquidation can have a number of major advantages for directors and shareholders of a company that has overwhelming debt problems.

The main advantages are:

•  Allows you to step away from the insolvent company with no further liability (unless debts have been personally guaranteed)
• Write off 100% of what the company owes
• It shows creditors you have done the right thing by taking professional advice and can steer you away from the implications of wrongful trading
•  A very quick, cost-effective way of formally closing down a company and complying with your duties as a director
• Can be funded using company assets such as cash at bank, sale of assets, book debts etc.
• Employees and potentially directors can make a claim from the National Insurance Fund and receive payments for outstanding wages, holiday pay, pay in lieu of notice and redundancy
• Stop demands from creditors
• Provide peace of mind to the directors and enable a fresh start free from debt

Entering a voluntary liquidation means that your insolvency practitioner will become the point of contact for all your creditors, this means that you do not have to take any more harassing phone calls and any threatening letters can simply be forwarded on for them to deal with.

It is the liquidator’s (Insolvency Practitioner’s) duty to deal with all creditors and realise the company assets. The directors are removed from office and are free to make a fresh start.

What Next?

If you would like any help or advice with decisions on liquidation or any of the other insolvency and turnaround options we have covered in this series then remember that Focus Insolvency Group are here to offer you free and impartial guidance. Get in touch today.

On Monday we will bring you part 2 of our guide to CVL’s with a look at the process of liquidation. If you have any comments or feedback please let us know in the comments below or send us an email.

Related Blogs

Is My Company Insolvent?

Business Health Check

Turnaround Advice

About Company Voluntary Arrangements

CVA Process

Is Administration Right for your Company?

The CVL Process

Options Available to Struggling Limited Companies  – Round Up

Is Administration Right for your Company?

We continue our series of blogs about options available to insolvent limited companies this week by looking into Administration. If your business health check reveals that a solution to its financial difficulties may be required; then administration is another route that can be looked into. You can catch up with the series so far with, Is My Company Insolvent?, Business Health Check, Turnaround Advice; Company Voluntary Arrangements and the CVA Process.

 So, what is administration?

 The idea of administration is to act as an alternative to winding up the company so that where possible the company or at least its business can be rescued. If a company falls into financial difficulties the directors or a third-party will sometimes appoint an administrator to run the company. Administration is a key insolvency tool to implement the rescue and survival of the business and provides the company with immediate protection from its creditors. This is to determine whether the company can trade out of its problems or be sold on to enable the company to be turned around. If the company is not a viable concern then these assets will be sold and distributed to its creditors.

 There are three routes into administration

•  The company and its directors can file a notice at court

•  The holder of a qualifying floating charge can file a notice at court (such as those that have a debenture over company assets)

•  Or a court order can be made to place the company into administration.

 Before accepting an appointment an administrator must be satisfied that one of the following outcomes can be achieved.

  – Rescue – The company would still continue to exist in its original form and eventually be returned to the directors with some sort of debt restructuring or Company Voluntary Arrangement in place. The company must continue business as a trading viable concern.

  – Better result for creditors – This would allow for a better return to creditors than if the company were to be wound up. The main core of the business may be sold on and survive as a going concern with any unnecessary parts being stripped away and sold. This is the most usual outcome of administration.

  – To allow distribution to secured and preferential creditors – This allows for a better outcome for this class of creditor but other unsecured creditors would receive nothing. This may be a useful option if trading needs to continue for a limited period, for example to complete a contract. The business would not normally survive in this case but is the least likely occurrence out of the three outcomes.

 Advantages of Administration

•  Administration offers full legal protection from all creditors whilst a strategy is formulated in respect of the future of the company
•  Gives directors or third parties an opportunity to buy back the business as a going concern
•  Offers vital breathing space whilst a business recovery or restructuring package is implemented
•  An administrator can be appointed very easily merely by filing the necessary documentation in court.
•  Costs are taken from the available assets in the company

 The Administrator

 The administrator will be a licensed insolvency practitioner and has the power to trade, manage and sell the business as a going concern in order to maximise the return the creditors. They will take full control of the company finances, affairs, business and property while an outcome is negotiated and achieved.

 Administration Process

 Once an administrator is appointed he or she has 8 weeks to produce formal proposals to the outcome of the administration, copies of these would be sent to the Registrar of Companies and all know creditors. Within 10 weeks the administrator must hold a meeting of creditors at which the proposals will be agreed upon. Once these proposals are agreed the administrator must manage the company in accordance with them to achieve the agreed outcome of the administration.

 Administration will last for one year and will end automatically after this time. Creditors can agree an extension of 6 months but any longer than this must be with court consent.

 Pre-Pack Administration

 Pre-packaged administration is a lot like normal administration but; as the name suggests, the process is a lot faster. In pre-packaged administration, a company is placed into administration and the business is sold immediately or shortly after the appointment of the administrator. The insolvency practitioner (the administrator), the directors and/or other interested purchasers will have obtained valuations, agreed a sales price and drafted contracts to enable the business to be sold immediately after appointment. Again, costs are met from the assets available.

 Advantages of pre-packages administration

• Pre-pack administration can result in a quick and relatively smooth transfer of a business
• Pre-packs can protect the goodwill of the company as they have minimal impact on customer confidence that any insolvency proceedings inevitably cause.
• Pre-packs can save more jobs than in normal administration
• Because the process is relatively quick compared to a normal administration, the costs of the administration process may be reduced, which may result in a better return for creditors.

 What Next?

 If you think that administration could be the rescue option your company is looking for then give Focus Insolvency Group a call, we can talk you through the options available and go into more detail about your company’s specific circumstances. All our advice is free and impartial.

 We will conclude our series of Insolvency Options for Limited companies next week with a look at Company Voluntary Liquidation. If you have any questions or comments please leave them below or send us an email, we’d really like to have your feedback.

Related Blogs

Is My Company Insolvent?

Business Health Check

Turnaround Advice

About Company Voluntary Arrangements

CVA Process

About Creditor’s Voluntary Liquidation

The CVL Process

Options Available to Struggling Limited Companies  – Round Up

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