Administrations usually last 12 months with possible extensions of up to 6 months with court consent.
The amount of time a company administration takes from appointment through to completion depends very much on the complexity and the exit route sought in the particular case. As a general rule, administration is not a quick fix procedure.
Read on to learn more about the timeframes involved in this insolvency procedure.
How Long Does a Company Stay in Administration?
Entering administration can take anything from a few hours to 2 weeks or more depending on your circumstances. The first step is to appoint an administrator. An administrator can be appointed a number of different ways. Companies and directors can appoint an administrator quickly with the guidance of an insolvency practitioner. This does not require a court order and can be done by a sending fax to the court with the appropriate forms.
Alternatively, if a company is already in liquidation or a CVA, the insolvency practitioner must obtain a court order before the company can be placed into administration. This process will take longer and holders of qualifying floating charges must be given at least 5 days notice of the company’s intention to appoint an administrator before the court order can be granted.
As soon as is practicable after the appointment, the administrator must obtain details of the company’s creditors and notify them of their appointment. The appointment must also be advertised in the London Gazette and in a relevant national or local newspaper.
The Statement of Affairs (SOA)
Upon appointment, the administrator will need one or more of the current or former directors to provide them with a statement of the company’s affairs. This will contain details of the company’s assets and liabilities, including any assets that are subject to fixed or floating charges.
There is a time limit of 8 weeks for the administrator to get proposals of what they intend to do with the company out to the company’s creditors. These proposals should include full details of the administrator’s appointment, a copy of the Statement of Affairs and details of how they anticipate the administration will end.
The initial creditors’ meeting must be held within at least 10 weeks of the date the company entered into administration. The creditors must be given at least 2 two weeks notice of this meeting, although this can be extended by the creditors or the court.
In the event that the administration process lasts 6 months or longer, the administrator has to report to the creditors on their progress and file reports to Company House.
Common Exit Strategies from Administration
The company is protected by the court while the administrator works with the directors to put together a plan for the company voluntary arrangement. If the creditors agree to the CVA, the company is handed back to the directors who can continue to trade. This process can be completed in a matter of weeks.
Where a plan is in place and a contract of purchase drawn up, a company can enter administration and be sold to the new owners by the administrator. This process can be completed very quickly, even over a weekend, and does not require the steps listed above.
If following the administration, there are assets that still to be realised or debts to settle, this can be done by entering the company into liquidation. This will take time and will bring the company to an end on completion.
If the administrator has carried out the relevant work they may choose to dissolve the company to rid it of the need to enter into liquidation. This may happen if there is no money to distribute to creditors or where all the assets have already been sold. In this case, the company will be closed and removed from the company record.