There is a big difference between administration (a rescue procedure) and winding up (where the company life is brought to an end). Our company rescue and insolvency experts can advise on all aspects of the insolvency and rescue regime.
We are often asked to advise on administration order vs winding up.
Directors considering putting a company into administration will frequently seek the advice of our expert team at Francis Wilks & Jones on whether putting their business under administration is more beneficial for company insolvency issues than placing a company into liquidation. Whether to apply for an administration order or a winding up order will depend on the circumstances at the time.
The main purpose of company administration is to rescue the business as a going concern, or to achieve a better result for the company’s creditors overall than if the company were wound up.
- the company administration procedure can allow a company to rescue the viable part of the business under administration. This may be by way of a prepack administration sale. One of the benefits of someone buying a company in administration is that this can save jobs and can continue the parts of the business under administration that are worth saving.
- a key benefit with a company administration is to take advantage of a moratorium, which prevents creditors from taking legal proceedings against the company or firm in administration. This gives a company breathing space to allow a rescue or restructure without having to deal immediately with creditor pressure.
Winding up order
A company winding up is a company insolvency process brought either by the directors or creditors. It is different to a company administration order.
- winding up is intended to end the company insolvency in an orderly manner. The liquidator will collect in the assets and distribute money available to creditors. Following liquidation, the company will be dissolved. This company insolvency process is often used if there is no viable business to be sold, for example by way of a prepack administration sale;
- there is no moratorium on legal proceedings against the company in a voluntary liquidation but if the liquidator wants any legal proceedings to be stayed or restrained, they can make an application to court;
- in a winding up, a liquidator may investigate the director’s management of the company, which could lead to action against a director for breach of directors’ duties. This could also lead to possible disqualification as a director. This does not occur with a company under administration, although often a company administration will become a liquidation when the administration ends, so this remains a possibility.
If you are a director considering either putting a company into administration or winding up, it is essential to take legal advice as early as possible to ensure you are protected as a director, and to consider the best possible option for your company. Our team of experts at Francis Wilks & Jones have years of experience dealing with company administration and winding up situations for companies facing insolvency. Contact us now for your friendly consultation.