Administration order advantages and disadvantages

Our team of insolvency experts at FWJ are frequently asked about Administration order advantages and disadvantages in the context of company administration, and in particular whether company administration is a good option for a business in financial difficulties, compared to other company insolvency procedures.  Below are some of the obvious administration order advantages and disadvantages.

Advantages

Putting a company into Administration means the company enjoys protection from its creditors by way of a moratorium on legal proceedings against the company while it is in company administration.  This gives valuable breathing space to rescue a company under administration.

An administration order often allows for the insolvent company to continue trading for a while, giving time for a purchaser buying a company in administration to do so, often saving the jobs of employees along with the sale of the viable parts of the business.  This generally provides a better return to creditors.

A business under administration will often take part in a prepack administration sale, teeing up the buying of a company in administration before the administration order is made, which can avoid worrying creditors and employees unnecessarily as is more likely with alternative company insolvency procedures.

An administrator of a firm in administration doesn’t have to investigate the directors’ conduct and report on this.

Disadvantages

Despite the moratorium, a creditor or any other affected person may apply to the administrator of the firm in administration asking for permission to bring a claim or otherwise take any action prohibited by the moratorium. 

Company administration is designed to be a short process and should last for no longer than a year. After that, the company under administration might exit administration into liquidation, and this opens the directors up to investigation for any misconduct by the liquidator.

Sometimes in all the circumstances it may be better to end an insolvent business than continue to trade and try to sell the business or parts of it.

Contact the company administration experts today

Our friendly legal experts at Francis Wilks & Jones have a vast range of experience in all aspects of company administration and other company insolvency options including administration order advantages and disadvantages.  Call us to discuss your situation and let us run through the best options with you.