As a company director, it’s quite likely that you’ll come across phrases and terms that you’ve not heard of before. Unfortunately, many of these phrases come at a time when your business is experiencing financial distress, and therefore, you may already be feeling more stressed. In this blog, we’re answering the question, what is a notice of intention to appoint an administrator?
What is a notice of intention?
A notice of intention is used by company directors who are considering placing their companies into administration. Usually, the director will send this notice out to the company’s creditors and other parties to inform them of their intentions with the company.
If a director is considering administration for their company, it’s very important that this notice is filed. This notice helps to prevent legal action against the company and allows the business some breathing space to determine the most suitable steps going forward.
Administrations should not be taken lightly. They require a lot of thought and can be costly for the company. Usually, this process will end one of two ways. The company will either be restructured or begin the process of pre-pack administration.
Who can serve a notice of intention?
A notice of intention for administration can be filed by several different parties involved in the process. The company directors can file it themselves, or the bank can file it. Banks are labelled as floating charge holders.
At the beginning of the process, a specialist administrator should be appointed. Usually, the administrator is chosen by the directors of the company, but there can be instances where the bank does not approve of the administrator, and they can choose their own.
Before the notice can be served, the company must share information regarding any company voluntary arrangements that are already in place. This should occur five days before the notice is served.
What happens after the notice of intention?
After the notice has been served, companies are given a 10-day moratorium period. This gives the business time to take a step back, assess its financial situation, and form a plan to deal with the issues.
The moratorium period gives existing directors some breathing space from other creditor pressure. In most cases, these creditors will not be able to take any further action against your company.
By the end of the period, the business’s future plans should have been confirmed. If the plans are still being decided, then a further moratorium period of ten days can be given to the company. For this to occur, you will need to provide evidence that you are trying to make suitable plans for the company.
Why do businesses enter administration?
Administration is often used by businesses that are suffering in the current moment but may be able to succeed with some restructuring. As we mentioned previously, administration is a costly process, so it should only be used if you are confident that it will benefit the company.
You must only use formal insolvency processes to close or restructure your company.
What is a Company Voluntary Arrangement?
A company voluntary arrangement (CVA) is an option for companies dealing with financial difficulties that could lead to insolvency. It is a legally binding agreement with the company’s creditors to allow a proportion of debts to be repaid over a specified period.
75% of the creditors by value must agree to this process, and if so, it can be one of the best ways for a business to recover and thrive after being burdened by historic debt. A CVA allows the company to repay the specified proportion of its debts over 1 to 5 years.
What is a Pre-Pack Administration process?
A pre-pack administration involves closing a company and starting a new one. The new company is referred to as a ‘newco’, and it will be required to purchase the assets from the old company.
All company assets must be independently valued by a professional company to ensure that the process is completed correctly. They should all be sold at the correct market value.
You should also maintain all documentation regarding these asset sales for future reference. You may be asked to present this evidence at some point throughout the process. A pre-pack sale can be used to improve a company’s financial situation and rescue a struggling company.
All formal insolvency procedures must be completed with a licensed insolvency practitioner. In most cases, you will be able to choose your own insolvency practitioner to help you with the process. When companies are forced into compulsory liquidation, they cannot choose their own insolvency practitioner, and they have very little control over the entire liquidation process. Compulsory liquidation begins with a winding up petition, followed by a court process and legal action.
You should only choose from practitioners who are registered with the Insolvency Practitioners Association.
Do you need advice on a notice of intention to appoint administrators? We can help. We’re here to provide honest, confidential advice on your company. Please don’t hesitate to contact us for support.
Please get in touch and we’ll come back to you
without delay.
Call 0808 506 2246
Text 07717 738 167
Complete a Free Online Enquiry