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Tuesday, 7 September 2010

What does going into administration mean?

We are often asked, "one of our customers / my employer is going into administration, please tell me what does going into administration mean"?

Unfortunately, for unsecured creditors ( trade creditors ) are unlikely to get anything back from the administrator.

Very rarely can administrators sell the assets and the business to generate sufficient monies to pay the bank (usually the secured creditors) in full, plus the unsecured creditors. What is more they will need to get paid their fee!

What about employees? Well it is, on the whole, bad news. The administrators have to take on the employee's rights after 14 days of being in office (as administrator), As such the administrators want to sell or close the business before they take on that risk.

So the administrator(s) will look at which parts of the business are viable and which should be closed. Then they will make the employees, who are surplus to requirements, redundant as quickly as possible.

Employees made redundant by an insolvency practitioner should visit our employees guide page.

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