(I-BusinessNews.Com, January 28, 2015 ) London, UK -- I used to think that perhaps they were never defined for a reason, and that it was the industries way of enshrouding themselves in a haze of mystique and wonder in order to justify charging large fees. Now however I know better, and in the interest of clarity the two processes are separate, yet they do share some common elements.
For example, both procedures are managed by licensed insolvency practitioners, and both relate to limited companies who, in the most part, are deemed to be insolvent. They will usually be defined as insolvent either because they are unable to make day to day payments for the running of the business, or because liabilities outweigh assets on the company’s balance sheet. However the processes are quite distinct.
Administration is a powerful tool used in the first instance to place the company into a kind of protective bubble, which halts creditor action and gives the administrators time to devise a strategy to repay the businesses debt and save the business if that is at all possible. Administration is only a relatively temporary state though, and during this period the administrators will be gathering information and data in order to assess the viability of the business, and what the best way of leaving Administration might be. Typically, Administration lasts up to one year, although this can be extended if required and the creditors and/or courts allow it.
Liquidation on the other hand is a terminal process which puts an end to the company, and can also follow an Administration period where no further prospect of repaying the company’s debt has been found. Liquidation sees the assets of the company being sold off or realised in order to make payments to creditors on a pro rata basis. It is worth noting however that this does not necessarily mean killing off the business, as in some cases the directors can purchase back the assets at market value and continue trading as a different company.
Falling into insolvency is an unpleasant place to be for any business, and understandably can lead to a lot of sleepless nights and stress for directors and stakeholders, yet it doesn’t have to be this way. Being pro-active at the first signs of trouble will always yield a more favourable outcome, and any business that is starting to feel the pinch should seek the advice of licenced insolvency practitioners without hesitation. For more information, or just to get some free over the phone advice, contact Wilson Field today on 0800 458 3320, or visit the relevant section of our website.
We are pleased to offer you this exciting, new, and entirely free professional resource. Visit our Free Industry resource center today to browse our selection of 600+ complimentary Industry magazines, white papers, webinars, podcasts, and more. Get popular titles including: