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What is Administration?

Meaning of Administration

Administration is the process of selling assets to recover a company’s debt. The administration creates legal protection for companies, since their  creditors  cannot take legal action to recover the money owed to them while the  debtor  is in the administration.

Why does a company go into administration?

Companies can go into administration if they have serious problems with their  cash flow  and cannot pay their creditors the money they are owed.

Company  directors  can start the administration process themselves, but creditors can also force a company to go into administration through a court order.

The process of running a business

When a company goes into administration, there is a specific process that must be followed:

1. Appointment of an administrator

The first step in the administration process is to appoint an administrator. The trustee you appoint must be a professional “insolvency practitioner”, and your company must cover their fees.

While in administration, the administrator has control over your business and its assets. Not only does this mean that they can sell any of your company’s assets to pay off their debts, but they can also renegotiate or cancel contracts, and they can also get employees fired.

2. Inform relevant parties

Once you have appointed an administrator, they will write to your creditors and to the Chamber of Companies. They will also publish their appointment in  The Gazette  , which is an official journal of legal notices.

3. Planning

The administrator’s goal is to repay the company’s creditors as quickly and fully as possible by leveraging (or selling) the company’s assets. They have eight weeks to come up with a statement explaining how they plan to achieve this.

Once they have a complete plan, a copy should be sent to the creditors, employees and Companies House, inviting them all to support or modify their plans in a meeting.

The most common plans include:

  • Negotiate a company voluntary agreement (CVA)
  • Selling your business to another company as a ‘going concern’
  • Sell ​​your assets, pay off your creditors, and then close your business
  • Close your business if you have no assets to sell

4. Termination of administration

The administration entry process ends when:

  • The manager decides that management objectives have been achieved.
  • The manager’s contract ends. This happens automatically after one year unless the contract is renewed.

Once your administration period ends, you will have no protection against any legal action your creditors may take.

Differences between entering administration and liquidation?

Administration and  liquidation  are processes that occur when companies struggle to pay their debts; however, there are some important differences between administration and liquidation.

Companies first go through administration when they have cash flow problems, but can still be viable in the long run. On the other hand, liquidation occurs when a business is no longer viable. In other words, while administration can result in the closure of a business, liquidation almost always ends with the closure of a business.

Second, the purpose of administration is to prevent the closure of a company, while liquidation is the process of selling assets so that a company can close. Thus, management is concerned with preventing closure, while liquidation involves preparing for closure.

Administration is the act of administering or managing businesses, people or resources, with the aim of achieving defined goals. It is a word originating from the Latin “ administration ”, which means “ direction, management ”.

Administration is a branch of the humanities that is characterized by the practical application of a set of principles, rules and functions within organizations.

It is practiced especially in companies, whether public, private, mixed or others.

The Business Administration course trains professionals responsible for managing the daily routine of an organization, from the control of financial, material and human resources to the development of market strategies.

The administrator has extensive knowledge to act in various areas, such as marketing and advertising, foreign trade, information systems, environmental management, logistics, third sector, etc.

Management must be a strategic task, that is, carried out in a studied manner and in accordance with strategic planning, in order to obtain better results.

Types of Administration

public

Public administration is the set of agents, services and bodies instituted by the State to administer certain areas of a society, such as education, health, culture, etc.

An individual who works in public administration is known as a public manager and has a great responsibility towards the society and the nation.

When a public agent incurs in an illegal practice against the principles of the Public Administration, he can be tried for administrative impropriety, in accordance with the Law.

Business Administration

In a company, the act of managing means planning, organizing, coordinating and controlling tasks to achieve productivity, the well-being of workers and profitability, in addition to other objectives defined by the organization.

One of the branches of business administration is financial administration, which consists of managing the organization’s finances.

The way organizations are managed will determine whether they will be able to use their resources effectively to achieve their goals. Therefore, the role of the administrator has a strong impact on the performance of organizations.

hospitable

Hospital administration or hospital management consists of planning, maintaining and controlling medical equipment and inventories.

Good hospital administration when there is a well-defined hierarchy of authority and when there is efficient and effective coordination between the different departments of the hospital.

Financial

Financial management is a science that aims to manage the financial aspect of an organization, company or individual.

Financial management can be divided into three subcategories: personal finance, corporate finance, and the financial market.

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