Does administration provide a light at the end of the tunnel

Can administration save a business?

In November 2022, the fashion chain Joules formally entered administration. Its share price had fallen by 95% in 12 months and its net debt was around £25.7m. The rescue deal negotiated by its administrators with retail giant Next secured the future of the business, securing 1,600 jobs and 132 shops. This successful administration highlights the opportunity for a business to exist beyond insolvency.

Depending on your circumstances, if your business is insolvent now but potentially viable going forward then administration might also be an option that’s available to you. In this article we focus on two forms of administration:

An open sale
A pre-pack administration

An open sale

With an open sale, it’s vital you get your business as fit as possible before it goes on to the market. In most cases, this means cutting costs to make your business more attractive to potential buyers.

Part of this process may involve selling certain assets to raise funds and decrease the amount of debt owed to creditors. Don’t worry – as the administrators appointed by your directors, our licensed insolvency practitioners will be responsible for making such decisions and finding the right buyers for your assets.

We’ll strive to get the best possible sale price, while balancing the need for a quick resolution for you, your creditors and your employees.

Pre-pack administration

A pre-pack administration is the sale of your business to a third-party. If the circumstances are right, this third party could be your own company directors. We’ll work with you to decide if the latter option is the best way of saving your company.

In accordance with insolvency laws, your company assets have to be valued by an independent assessor. The sale price is set on this valuation, even if your company directors would like to buy the company back. This price must be a reasonable and fair commercial price and the business could be sold to an interested outside party once advertised for sale. Furthermore, the funds for the purchase must come from outside of the company – that is to say, paid personally by the buyer.

As with all insolvency processes, our experts are there to guide you every step of the way, from entering administration to getting going again after the pre-pack purchase.

There are certain circumstances when an administration is the best way forward for your business – and can even set you up for a successful future. The involvement of a licensed insolvency practitioner from the first sign of trouble means it’s more likely you’ll achieve a more positive outcome for your business.

For further advice on administration, please call our expert team on 0800 054 6590 or email [email protected].

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