Rising Administration Numbers mean more Insolvency Options

The latest statistics from the Insolvency Service for February contain a couple of surprises. The overall number was down from January but one new trend that stuck out was the rise in administrations to 116.

This is 65% higher than January’s total of 71 and is 95% higher than February 2021. This is the highest monthly number recorded in over a year and shows that businesses are thinking carefully about liquidation and looking for alternatives instead.

Administrations were fairly common in 2019 and 2020 but because of government help including the furlough scheme, bounce back loans and bans on winding-up petitions, the need to go into administration was greatly reduced.

Now a lot of these have been rescinded, and administrations are rising once again.

Christina Fitzgerald, Deputy Vice President of R3, said: “While there has been a reduction in some types of insolvency processes, administrations have increased to a 15 month high.

“This increase suggests that there are a number of insolvent businesses which have some prospect for rescue, given this is one of the main statutory purposes of the administration process.

“Whenever possible the insolvency profession will work to secure the rescue of businesses in administration to help ensure better outcomes for the business, its staff and creditors.”

How can the administration process help a business stick around until it’s back on its feet?

Firstly, It’s important to remember that in a formal insolvency process the directors or shareholders of a business have to appoint the administrator.

It will be their task to run the business in the management’s stead to see if it can be restructured and rescued. There are several advantages to an administration. The first of which is that it stops all current and future legal action against a company.

The reason for this is to allow the administrator, who has to be a qualified insolvency practitioner, sufficient time to create a recovery plan which will allow a business to keep trading while they also look for savings to be made to protect the business even further.

They can also look at alternative strategies including a company voluntary arrangement (CVA) which might offer the company’s creditors a better deal.

A company that is trading and has a chance of returning to profit will always be better placed to provide a return to creditors than a liquidated one would. Many companies come out of administration stronger than before so it is definitely a process worth considering.

Before a company decides if this is the best method for them, they should get in touch with us to arrange a free consultation with one of our expert advisors.

They’ll provide clear and unbiased advice for each business and suggest what solutions would be the most appropriate and easiest to implement.