Administration: Administrative Receivership
Administrative Receivership – what’s involved?
Administration (Administrative Receivership) – this is when a business has no other option but to be placed into insolvency. The initial insolvency period is called Administration, and an independent Insolvency Practitioner (IP) will be appointed (normally by a lender) as the first step on the insolvency ladder. Their role is to help turn the business financial health around, but often the case is that a recovery expert is brought in too late to save the business and it quickly becomes a going concern. The IP will assess the volume of debt, number of creditors, balance sheet and cash flow forecasts and the liquidity of the business. If the business has an order book of sales or an attractive brand, the IP may try to find a buyer for the business. Any financial assets are sold off and creditors are paid from any residual assets in a specific order.
Compulsory Liquidation – this is when there is no way for the business to be saved and it is liquidated. If there is no other option than to end the business, the appointed IP/solicitor/accountant will implement insolvency proceedings and a Winding-Up Petition is drafted to begin formal insolvency and liquidation. Any financial assets are sold off and creditors are paid from any residual assets in a specific order.
