Administration in the southeast

I recently worked on an administration in the south for the KSA Group.

KSA director of insolvency Eric Walls was appointed joint administrator by the holder of a qualifying floating charge, after a winding up petition was served on the company in December 2010.

The strategy for the administration was to trade the business for a short period of time and market the business for sale as a going concern. The joint administrators continued to collect the debtor book and looked to complete any ongoing contracts, in order to maximize any possible return to creditors

The director was asked to advise on work in progress and assist with collecting the debtor book.  In some cases, the directors are relieved of  their duties by the administrator and have no further involvement in the company.

During  13 days of marketing, a number of offers for the purchase of the business were considered. One of the main purposes of an administration is to try and secure a better result for the creditors than would be achieved in liquidation.

A purchase was finally agreed with a buyer, who also employed the company’s workforce, thereby saving a number of jobs.

Administration can be a costly process and is really only feasible if sufficient funds can be generated and a better result for the creditors is likely to be achieved.

If the business is still viable but a winding up petition has been served against a company, administration can be a very powerful tool as a moratorium takes effect putting a stop to all action against the company.

In some circumstances, a company in administration can propose a company voluntary arrangement (“CVA”) to its creditors in order to restructure the company’s unsecured debts over say 5 years, thereby hopefully leading to better prospects for creditors and the company going forward.

 The administration period would come to an end with the company exiting into a CVA

A properly constructed and successful CVA will almost always generate a better result for the creditors than liquidation. It can also enable the business to go forward and ideally exit the CVA with the creditors receiving a reasonable dividend over the proposed period.

Please visit www.companyrescue.co.uk for further information on any of the issues mentioned above.