The importance of appointing the right administrator
When businesses start to get into financial difficulty, it does not have to represent the end of the road.
Entering administration is a rescue mechanism for insolvent entities that allows for continued existence and trading.
Therefore choosing an administrator that is capable of achieving an excellent result is vital.
They will, after all, be responsible for the actions of your business while it is under their control as they search for a way of satisfying the creditors.
It is also important that they can be open and honest about the proposals being presented as it is very important a client understands everything that is going on.
If the plans put forward are not beneficial, the right administrator should also help to set the record straight and recommend alternative options that are helpful to the business.
CVA options
An administrator should also be comfortable, if necessary, with putting forward plans for a business to enter a Company Voluntary Agreement, which can reduce creditor pressure and allow for quick restructuring of a business.
A CVA allows a company to freeze unsecured debt and work out a viable way of repaying them over time from the profits generated by the business.
It is by its very nature a very flexible arrangement and it can be adapted to meet the needs of any business, making it very important to have the correct plans in place.
Pre-pack alternatives
Another alternative is the pre-pack administration route, whereby the directors or another third party are able to purchase some or all of the assets and transfer those across to a new company.
This limits the impact of the administration on the business, while it can also mean it’s possible to retain staff if the new business plan allows.
The continuation of a business may depend on the knowledge and skills of an administrator, so it’s absolutely imperative that a company selects the right person for the job.
By Phil Smith