Please Note: This Article is 2 years old. This increases the likelihood that some or all of it's content is now outdated.


In any dealings in business you want to ensure that you are dealing with businesses that are basically solvent, whether this is a contractor you have engaged to do work, a customer you supply goods or services to, or as landlord or tenant.

It is always prudent to do due diligence checks on the party you intend to enter into a business arrangement with, as well as ongoing checks occasionally while the arrangement continues, for example while a business tenancy is ongoing.

Companies House now supplies free and quite comprehensive information regarding a company’s officers, reporting and accounts, but this information is invariably several months out of date.

Nevertheless, a pattern of behaviour and financial performance can usually be discerned by comparing several years’ worth of the online accounting reports. Alternatively, using one of the specialist credit reference agencies to check-out the company could be very worthwhile.

If the worst should happen and the commercial landlord appoints debt collectors or High Court Enforcement Officers then one remedy open to them is to seize a debtor’s goods. This often stops them trading and usually brings things to a head quickly – speed is usually of the essence and gives creditor first movers an advantage.

When a company goes into administration it has entered a legal process (under the Insolvency Act 1986) which aims to rescue or sell the business as a going concern if at all possible.

After a licensed insolvency practitioner has been appointed either by the directors, a creditor or a court the administration process, it puts in place a statutory moratorium. This gives the company a ‘breathing space’ freeing it from its creditors’ enforcement actions while restructuring takes place to rescue the company as a going concern wherever possible.

If the business cannot be saved, the administrator will seek to minimise creditors’ losses, perhaps by allowing it to continue to trade for a period while seeking a sale of the business, or its assets piecemeal. For example: goodwill, trademarks, patents, equipment, the customer database, software

content or websites may have value and there may be a ready market, so the proceeds can be returned to the creditors.

Pre-Pack Administration

The main value in a company is often its good name (goodwill) or the company’s brand, which, when a company enters into administration will quickly dissolve into thin air, or be highly diminished and reduce the chances of a sale. The practice of pre-packaged administration has evolved to combat this.

So, before going into full administration, and where potential purchasers for a business and its assets can be found, or where a part of the business can be sold or closed down, the a sale of all or part of the company’s business and assets can be negotiated.

Purchasers may be directors, shareholders, others connected with the insolvent company or outside purchasers, or it may be possible for the company to simply be slimmed down and continue to trade on a reduced scale.

Landlords often come up against administrators when an insolvent tenant company owes them money, rent arrears, service charges etc.

What to do when your debtor enters administration

David Asker, Director of The Sheriffs Office writes:

“The starting point for enforcement is not good for creditors, but the administrator does not have the power to turn back time. If you have instructed a High Court Enforcement Officer (HCEO) and are mid-enforcement, i.e. you have a controlled goods agreement which is not the subject of fixed charges, then the moratorium acts to protect you, i.e. the administrator cannot ignore your enforcement. Similarly, if you have taken control of goods, then you must hold them pending confirmation from the administration that they may be disposed of.”

The strength of your position is very specific to your case writes Mr Asker.

“If the administrator has a desperate need for the goods you have taken control of or the debt secured is materially less than the value of the goods, then the administrator will come up with a strategy to ensure you are paid.”

More often that not the goods are just not worth anything like as much when sold second hand as they cost originally, particularly when auctioned off. In this scenario, the administrator is likely to either allow the enforcement to continue, leaving you with an unsecured claim in administration in respect of any balance remaining from the sale, or they will value the items and suggest they be sold by the administrator. When the goods are sold, an agreed sum would be paid to the creditor via the HCEO.

“I have always found it best to consider the law as it relates to Insolvency as being continually in flux. The certainties of life that we all crave just cannot exist long-term in an area of the law where so much pain can be metered out!”, says Mr Asker.


The appointment of an administrator is designed to protect the position of creditors and to stop individual creditors taking matters into their own hands, thereby destroying value which, if better handled would benefit all creditors. By its nature, it is a process which is very case specific and claimants in the midst of enforcement are advised to seek legal advice before finalising their strategies, says Mr Asker.

Please Note: This Article is 2 years old. This increases the likelihood that some or all of it's content is now outdated.


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