Voluntary administration is a useful alternative to winding-up
When you’ve spent a long time trying to solve a problem without being able to make any headway to a solution or if you’ve spent a day arguing with someone and neither of you have conceded an inch then taking a break is a good way of resetting.
How many times have you been able to make elusive progress after sleeping on a puzzle or problem and coming back fresh with a clear head?
It’s the same with companies.
Some of them could be perfectly sound businesses with scope for growth and expansion but due to one or two temporary negative circumstances they are struggling or even insolvent.
This is where voluntary administration can help a business catch its breath, refocus and reemerge with greater energy and clarity to pay its creditors and return to profit and a brighter future.
Yes, an insolvent company could be wound-up, closed and sold off but the process is time-consuming, complicated and with no guarantees that creditors would be repaid. A functioning business out of voluntary administration is often a better bet for profits.
Initiating a voluntary administration is straightforward. A simple majority of directors can pass a resolution and it can be completed and implemented in under four weeks.
Once enacted by a professional insolvency practitioner, a moratorium is granted stopping creditors from taking recovery action against the company or personal guarantees being reinforced against the directors.
This gives an otherwise financially sound company, time to trade its way out of its current difficulties or reduce debts and costs and rebuild sales and profits.
A voluntary administrator is appointed by the directors (although they can also be appointed by other parties with standing such as a liquidator or secured creditor) to oversee the process.
Voluntary administrator is just their title – they’re an insolvency professional but they aren’t doing it for free!
The administrator will take over the company to review it from top to bottom and decide on the best way forward through a rescue plan.
This could involve coming to an arrangement with your creditors to settle your existing debts called a Company Voluntary Arrangement (CVA).
Alternatively they could look to market the business to new potential buyers through appropriate channels as a going concern which could attract new ideas, energy and investment into the company.
If a CVA can’t be agreed or If the business is unable to be sold in this way then various stock, assets or other parts of the business could be sold to help maintain the main body of the company.
Alternatively, the business could be purchased by existing directors or qualified third parties as part of a pre-pack administration deal. This process is usually quicker and more efficient as the sale is concluded at the same time as the administrators are appointed.
Voluntary administration is also different from voluntary liquidation (CVL). This is where the directors seek to close down the company at their earliest convenience.
Getting a voluntary administration underway is relatively easy.
They will be able to find out more about your immediate situation, talk you through all the necessary steps, what forms to submit and to whom, and the approximate timescales and costs you’ll be looking at.
They’ll also run through any likely changes to the day-to-day running of the business that an administrator will enforce and what their responsibilities will continue to be.
So if your business needs a time out, get in touch with us and we’ll help stop the clock while we plan your next play – together.