What Is Administration?

Bonmarche have fallen into administration for the second time in a year. They join Arcadia Group who met the same fate earlier this week. If you hadn’t previously heard of Sir Philip Green’s Arcadia Group, it’s more than likely you are now familiar with the name given that headlines are naming it the biggest business failure of the pandemic so far. Our Insolvency and Corporate Recovery team answer some of the most asked questions surrounding this corporate rescue tool.

What Is Administration?

Administration is a process which pauses creditors’ rights to enforce their individual claims against an insolvent company, allowing it to be restructured or for its business and assets to be sold so that a better outcome can be achieved for creditors as a whole.

What Is The Role Of An Administrator?

When a company enters administration, an insolvency practitioner is appointed as the company’s administrator. The administrator takes over the control of the company’s business and assets from the company’s directors.

The administrator(s) takes steps to reorganise or realise the insolvent company’s assets. They will do this to achieve one of the following objectives:

  • Rescue the company;
  • Achieve a better result for the company’s creditors as a whole than would be likely if the company were wound up without first being in administration; or
  • Realise of some or all of the company’s property to make a distribution to one or more secured or preferential creditors.

The administrators have a duty to behave fairly and honourably in their role and carry out their functions in the interests of creditors as a whole. They must also perform their functions as quickly and efficiently as is reasonably practicable.

What’s The Benefit Of Administration?

The appointment of administrators creates a moratorium which prevents creditors from bringing legal action to recover the money they are owed. This ensures the company’s rescue is not put at risk by multiple claims by creditors during the administrator’s appointment and gives the administrators some breathing space.

The moratorium does not extinguish the creditor’s rights against the company, but suspends them from being exercised while the administrators take steps to try to achieve the objectives set out above.

How Long Will The Administration Last?

Unless extended, the administrators’ appointment will end 12 months from the date the company entered administration.

In these trying times, if you are concerned about your company’s financial position now or in the near future, get in touch with Geldards’ Restructuring and Insolvency team to discuss further.

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