The Administrator’s fees are divided into two main components. The first component covers the costs incurred prior to the commencement of the Administration, which can be higher if it involves a pre-pack Administration or significant preparatory work. For a small Administration, the typical pre-fee cost ranges between £5,000 and £10,000, but this can be significantly higher for larger or more complex cases.
Once the Administrator is formally appointed, there are various statutory obligations to fulfill, as well as the practical tasks of either closing the business, selling it to a new owner, or continuing to trade. We can provide you with an estimate for the expected level of these fees.
All fees incurred after the Administration begins must be approved by the creditors, and in some cases, creditors may also need to approve the pre-Administration fees if they have not been agreed upon with the directors in advance.
Who pays administrators fees
The Administrator’s fees are typically paid from the assets of the company in administration. If the company continues to trade during the administration, any profits generated may also be used to cover the fees. Additionally, funds raised from the sale of company assets can be used to pay the Administrator’s fees and other associated costs.
In some cases, secured creditors (such as banks) may have priority over the funds available, meaning the Administrator’s fees would be settled after their claims are addressed. If there are insufficient funds to cover the fees, the Administrator may seek approval from the creditors or the court for payment arrangements.
Why consider administration for an insolvent company?
For companies facing insolvency, entering administration can offer several key benefits. It provides breathing space to explore recovery options and protects the company from immediate creditor action, giving it the best chance of survival.
Protection from creditors
Administration gives the company legal protection from creditors while the process is ongoing. This stops any legal actions, such as county court judgments (CCJs) or winding-up petitions, providing relief to directors who may have been under significant pressure from creditors.
Opportunity for restructuring
Administration allows the insolvency practitioner to explore restructuring options to improve the company’s performance. The protection from creditors provides the time needed to implement changes, increasing the chances of avoiding liquidation.
Maximising creditor returns
An administrator’s goal is to secure the best possible outcome for creditors. If the company can continue trading or be sold as a going concern, it often results in a higher return for creditors compared to other insolvency procedures.
Preserving jobs
If the company can be restructured and continue trading, either short-term or long-term, it increases the chances that employees can keep their jobs and continue receiving their salaries.
Read more: Pre pack administration guide
Conclusion
Administration is a formal insolvency procedure that must be handled by a licensed insolvency practitioner (IP). It allows the IP to take control of the company, providing protection from creditor action while working to determine the best course of action for the business.
We don’t require an upfront fee to initiate an administration. However, the total costs involved will depend on factors such as the size and complexity of the company, the length of time the administration lasts, and any expenses related to the sale or realisation of company assets.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.