HomeFWJ TakeawayResourcesWhat are advantages and disadvantages of company administration?

It is useful for a company experiencing financial difficulty to know what the advantages and disadvantages of a company going into administration.

Advantages

  • protection from creditors during moratorium – once a company has become insolvent and has been placed into administration, a protective barrier is placed around the company so that any other creditors of the company cannot take action against it;
  • restructuring of the insolvency company – administration is an opportunity to review the non-profitable aspects of the company to ensure that this is eradicated;
  • control of the company is given to a professional insolvency practitioner – insolvency practitioners/administrators once appointed have a vast amount of knowledge and experience in being able to deal with a company in financial difficulty. An administrator will be able to make objective decisions about what is best for the company.

Disadvantages

  • advertising that the insolvent company has entered administration – this is likely to be damaging to the business. Once a company has entered information, by virtue of Insolvency Rules, all correspondence with the name of the company must state that it is in administration.
  • expense – the cost of placing a company into administration can be costly. There are usually lots of parties involved in the insolvency process that are required to be paid first once the company has been sold.
  • directors are no longer in control – once administrators have been appointed over a company they take control of the day to day workings of a company and the directors no longer control the company.

If you would like to discuss in more detail the advantages and disadvantages of a company going into administration, please give one of our team a call who will be happy discuss this in more detail.

Contact us in confidence