How to appoint an administrator for a limited company

Who can place a company into administration?

Administration may be a suitable option for companies struggling under the weight of insolvency, yet it is believed that the business itself is ultimately viable in the long-term. A company may also be placed into administration if it is deemed that doing so will realise greater returns for creditors than would otherwise be possible if the company was placed into liquidation without first being in administration.

What is the process for appointing an administrator for a limited company and who can do this?

Administration can only be entered into under the guidance of a licensed insolvency practitioner who will act as the company’s administrator during the process. An administrator can be appointed in one of three ways:

1. Out of court appointment by directors - The insolvent company’s directors/shareholders can voluntarily appoint an administrator by majority agreement if there are no outstanding winding up petitions against the company and the company is not already in a liquidation process. No creditor or shareholder approval is needed for this and, while a Notice of Intention to Appoint Administrators must be filed at court, no actual court hearing is required. An out of court appointment can be achieved extremely quickly in the right circumstances. Furthermore, administration will immediately grant a moratorium which will provide the company with swift protection against any legal action by creditors.
2. In court appointment by directors – If the company is not eligible for an out of court administration appointment (e.g. due to there being an outstanding winding up petition, the company already being in liquidation, or the company having been in a failed CVA or administration process in the last 12 months), the directors/shareholders can instead apply to court to have the company placed into administration. As there is a requirement to have a court hearing, an in-court application is a lengthier and more involved process, however, for those involved in an internal director dispute over the future of the company, or those otherwise not eligible for an out of court appointment, this may be the only way of achieving the aim of placing the company into administration.
3. Creditor appointment – It is not only a company’s directors and shareholders that can ask for the company to be placed into administration. Creditors, including those holding a qualifying floating charge, can appoint an administrator due to a defaulted debt if they believe this will improve their chances of getting the money they are owed. While qualifying floating charge holders can appoint an administrator out of court, other creditors will need to apply for a court order in order to achieve this outcome.

Is administration right for my company?

While administration can be a useful process in the right situation, it is not suitable – or even possible – for all instances of company insolvency. When directors choose to place their company into administration, it must first be determined that administration will satisfy one of the following statutory purposes:

1. Administration will allow the company to be rescued as a going concern
2. Administration will see a better return for the company's creditors as a whole than would likely be achieved if the company was liquidated without first being placed into administration
3. Administration will allow for property to be realised so that a distribution can be made to one or more secured or preferential creditors

If none of these objectives are possible, then administration is not a suitable route forward and instead an alternative rescue or restructuring strategy will need to be considered if the company is to continue operating or have its affairs wound down,

Whether administration is appropriate or not, a licensed insolvency practitioner will be able to talk you through your options and identify the one most suitable for your company, its current position, and its future ambitions. Rest assured that no matter your situation, there is a solution out there to help you navigate your financial and/or operational challenges even if this is not administration.

Other rescue and restructuring processes such as a Company Voluntary Arrangement (CVA) could better solve the problems the company is experiencing as well as improving returns for creditors.

With a nationwide team of licensed insolvency practitioners, Begbies Traynor Group are able to provide the expert help and advice you need when considering administration for your company. Contact one of our partner-led team to arrange a free, same-day consultation in complete confidence.