Going into Administration. A new beginning?

There’s much doom and gloom about the UK economy right now, with the hangover from the pandemic and Brexit mixing with inflation and the cost-of-living crisis.

Many companies, large and small, face the prospect of going into administration. But rather than fear it, could it be a blessing in disguise?

One of Britain’s best-known entrepreneurs, Richard Branson, said, in a letter to staff after Virgin Australia went into administration in April 2020, “Never one to give up, I want to assure all of you – and our competitors – that we are determined to see Virgin Australia back up and running soon.”

How could going into administration benefit your company?

The ‘breathing space’ administration affords is one of the main benefits – but it’s far from the only one.

1. Move forward debt free

Negotiating deals to pay off creditors means you can move your business forward debt-free. This increases your scope for investment in technology, staff, product development and marketing/PR. It could also give you a competitive advantage over rival businesses carrying a debt burden.

2. Create a more agile business

Too often companies operate a business model ‘because we’ve always done it that way’. Streamlining is an inevitable part of the administration process, giving you the opportunity to work better with customers, suppliers and staff.

For example, the coronavirus pandemic has shown many firms that they can operate without having to rent office space (or they can vastly reduce their office-space requirements).

Mike Hampson, chief executive of Bishopsgate Financial, told the this is money website the company is “ditching [its] swanky offices in London”.

The business employs 18 people but following the lockdown he has realised that the staff only needs to meet a couple of times a month to operate, and all will be working remotely.

3. Save jobs – and the wider economy by going into administration

Unlike insolvency, where all jobs are lost, administration means there’s a good chance some jobs will be saved.

And by continuing to trade, your company is helping others by doing business with them – and so the wider economy. The government benefits too, from an increased tax take and spending less on social security programmes.

4. Enhance your business reputation

Taking a company into administration and bringing it out the other side leaner and more fit-for-purpose shows you have solid business acumen and are not afraid to make tough decisions when they need to be made.

The types of administration we offer

Administrations generally resolve in four ways: with a CVA, with a pre-packaged insolvency sale, with a healthy, stable business, or with liquidation/dissolution.

For the purposes of this article we will focus on the first two.

Company Voluntary Arrangements (CVA)

CVAs are a common way of dealing with potential insolvency. Working with a licensed insolvency practitioner (IP), you must work out a schedule for repaying your debt – also outlining what percentage of the debt you will be paying back.

A CVA is a formal arrangement that must be overseen at all stages by the IP, who ensures creditors are paid the right amount and on time.

Creditors vote to accept the proposal, and in many cases approve because they accept that having some of their debt repaid is better that none at all (which could be the case with liquidation).

At the end of the term of the CVA a certificate of completion is awarded, subject to approval from HMRC. This proves the CVA was carried out in accordance with the terms and conditions agreed between debtor and creditor.

The process has also been used by clothing store All SaintsHotter Shoes and high street giant Debenhams.


Insolvency trade body R3 describes a pre-pack as: “where the sale of a company’s business and/or assets is arranged before the start of an insolvency procedure then completed immediately or shortly after the procedure begins. Proceeds from the sale are used to repay the company’s creditors.”

Pre-packs take place when an IP agrees a pre-pack is the means of achieving the best possible returns for the company’s creditors (all pre-packs are overseen by an IP).

Bed retailer Dreams is one high-profile example of where a pre-pack has been used successfully. Others include Blacks Leisure and Little Black Dress.

For advice and help with your Company Voluntary Arrangement, call 0800 054 6590 to speak to one of our licensed insolvency practitioners, email us at [email protected] or request a call back

Where to start

1. Appointing an administrator

Engaging the services of a licensed insolvency practitioner (IP) is the first step – and the most important one. Companies such as FA Simms employ insolvency practitioners with years of experience, with experience of working with companies of varying sizes in a wide range of sectors.

One of the crucial aspects of appointing an IP is that it buys your company time. Effectively, it keeps creditors at arm’s length, providing much-needed breathing space. Any legal action against your company will be frozen for the duration of the administration.

Working with the administrator you can use this time to create a recovery plan, which outlines the next steps to be taken.

2. The recovery plan

The recovery plan explains how debts are to be repaid, as well as how costs can be cut to make the business viable going forward.

It is important to remember that while the administrator is ‘on your side’, they have a legal duty to act in the best interests of your creditors.

3. The creditors’ meeting

By law, you must call a creditors’ meeting within 10 weeks of your company going into administration.

At the meeting (which will probably take place remotely) you will explain your recovery plan to creditors. If the majority of them vote in favour of it then the administrator will proceed with it. In this event, the administrator may want to set up a creditors’ committee to help expedite the recovery plan.

Generally, creditors tend to be supportive: they are more likely to recover more of the money they are owed from a company in administration than a liquidated one.

Acting together, and with your input, the administrator and creditors’ committee will be able to discharge your company’s debts, streamline and restructure it, and then move it forward into profitability and a brighter future.

Do note, however, that if the recovery plan is rejected then a court will decide on what happens next.


Going into administration can be daunting, a tough step to take. But with the right help it need not be the end of the line for your business. You could emerge debt-free (or with much less debt), leaner, with more insight and more positive that you have been in years.

It enables you take a step back, evaluate what you as a business are doing wrong – and what you are doing right. With this insight you can re-engineer the company, streamline processes, chop out the dead wood and start afresh. Importantly, you‘ll need help with all of this – and that’s where a licensed insolvency practitioner comes in.

For advice and help with your financial challenges, call 0800 054 6590 to speak to one of our licensed insolvency practitioners, email us at [email protected] or request a call back

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