Can A Company In Administration Still Trade?

Let’s face it, running a small business is a rollercoaster. You’re the jack of all trades, the master of none, and sometimes, things just go off the rails financially. If you’re staring down the barrel of administration, it’s natural to feel scared and lost. But hold on – administration isn’t the grim reaper of businesses. In fact, it can be a lifeline, and guess what? You might even be able to keep the doors open!

In this article, we’re tackling a big question: can a company in administration still trade? Buckle up, because we’re diving deep!

Free Initial Telephone Discussion

For a free initial discussion with a member of our New Enquiries Team, get in touch with us today. We are experienced in dealing with all the legal aspects of company administration, and once instructed, we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you are on the best possible footing from the start and also avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.

First Up: What Exactly is Administration?

Think of administration as a form of business rescue mission. When your company can’t pay its debts, an insolvency practitioner is appointed as administrator. This superhero swoops in, takes temporary control of the company from the directors, and gets to work assessing the situation. Their goal? To find the best way forward, whether it’s restructuring your business, selling it as a going concern (meaning it keeps operating), or, if absolutely necessary, selling off assets to pay creditors.

Trading During Administration: A Glimpse of Hope

Now, for the good news – in many cases, administration allows your business to keep trading while the administrator works their magic. This can be a game-changer. Here’s why:

• Keeping the Cash Flow Going: Let’s be honest, stopping business altogether would be a disaster. Trading allows you to keep generating income, which can be used to pay staff, suppliers, and even some creditors. This breathing room helps the administrator assess the viability of the business and explore potential solutions.
• Maintaining Momentum: A company that keeps operating is a company that stays visible. Trading during administration sends a positive message to customers, suppliers, and potential buyers. It shows that you’re not throwing in the towel, you’re fighting to stay afloat.
• Protecting Staff and Relationships: If you can keep trading, you can potentially avoid redundancies and keep your loyal team employed. This not only helps maintain morale but also ensures you have a skilled workforce ready to roll when things turn around. Plus, continuing to fulfil orders keeps your relationship with suppliers and customers strong.

But Can Everyone Trade in Administration?

Unfortunately, it’s not a one-size-fits-all situation. Whether you can keep trading depends on a few factors:

• The Health of Your Business: If your business is haemorrhaging money and on the verge of collapse, trading might not be a viable option. The administrator will assess your finances and determine if continued trading would benefit the company or simply burn through what little cash remains.
• The Type of Administration: There are different types of administration, each with its own rules. Some administrators might be more flexible when it comes to trading, while others might put a stricter focus on other aspects of the rescue plan.
• Creditor Approval: Sometimes, creditors have a say in whether or not a company can keep trading. The administrator will negotiate with them to determine if continued trading is in their best interest as well.

Okay, So How Does Trading in Administration Actually Work?

If the stars align and trading gets the green light, here’s what you can expect:

• The Administrator Takes the Wheel: While you can still provide input and expertise, the administrator will be in control of all financial decisions. This includes managing incoming and outgoing funds, negotiating with suppliers, and ensuring all trading activities are conducted legally.
• Trading Under Scrutiny: Every penny counts, so all your trading activities will be monitored by the administrator. They’ll need detailed records of income, expenses, and stock levels to ensure things are running smoothly.
• Adapting to the New Normal: Things might not be business as usual. The administrator might make changes to how the business operates, such as renegotiating contracts with suppliers or prioritising certain orders. It’s important to be flexible and adapt to these changes.

What About My Role as the Business Owner?

While the administrator takes the lead, you’re not out of the picture entirely. Here’s how you can contribute:

• Knowledge is Power: You know your business best, so be prepared to answer questions about finances, operations, and customer contracts. The more information you provide, the better equipped the administrator is to make informed decisions.
• Teamwork Makes the Dream Work: Think of this as a collaborative effort. Your experience combined with the administrator’s expertise can be the winning formula for saving your business.

How we can help

We have a proven track record of helping clients deal with the legal process involved in administration. We will guide you diligently and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting. You can read more about the range of corporate services we offer by clicking here: https://blackstonesolicitorsltd.co.uk/corporate-legal-services/

How to Contact Our Corporate Solicitors

It is important for you to be well informed about the issues and possible implications of corporate administration. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.

To speak to our Corporate solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.

Authored by Ben Posted in Blog, News Tagged as

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