High-street stalwart Wilko is the latest retail giant to go into administration after hitting financial difficulties. But what does administration actually mean for a business? And what might the future look like for Wilko? This article explains what administration actually is, as well as the possible options that a business like Wilko might face going forward.  

What is Administration? 

Administration is a process designed to protect a company in financial difficulty as well as its creditors. It is used where there is a chance of saving a business, as it allows time for a potential restructure or rescue of the company. The person appointed to undertake administration is known as the administrator. The administrator can be appointed through a court order, by the company or its directors, or the holder of a floating charge

What is the purpose of administration?

Under the Insolvency Act 1986, the administrator must perform their role with the objective of:

i) rescuing the company as going concern ie. a business that is operating and making a profit; or

ii) achieving a better result for the company’s creditors than would be likely if the company were wound up (without first being in administration); or

iii) selling the company’s assets (e.g. property) so the money can be used to pay debts owed. 

The administrator of a company must perform their functions in the interests of the company’s creditors as a whole.

What happens if the administration process is unsuccessful?  

The company will be liquidated if it cannot be saved.

Liquidation, sometimes referred to as ‘winding up’, is the process whereby a business is brought to an end, with its assets being sold to try and pay off its debts. As liquidation is the end of a company, it will be removed from the register at Companies House.

The process of selling off the company’s assets to raise funds which can be distributed between the company’s creditors will be carried out by appointed liquidator will begin the p  

Liquidation

Liquidation may follow on from administration. There are two types of liquidation: 

i) voluntary liquidation, (decided by directors and shareholders); and 

ii) compulsory liquidation, (decided by the courts). 

A liquidation can be classed as:

i) solvent, which means the company is able to pay its debts; or

ii) insolvent, which means the company’s debts are larger than its assets, or cannot be paid off in full.

What does administration mean for Wilko?

Wilko entered administration because it hit financial difficulty and a buyer could not be found to purchase the whole company. This is probably because the business will need a large cash injection to turn it around. It has been reported that there may still be buyers potentially interested in acquiring parts of the business, however, approx. 400 shops and 12,500 jobs remain at risk.  

How we can help 

We specialise in insolvency law, including bankruptcy, liquidation, administration and receivership. We advise clients in the most cost-efficient manner and support them in what can be a financially stressful time. So, if you: 

* want more information about insolvency generally; 

* have concerns about cash flow or creditors; and/or  

* want to find out what options might be available to you and your business in a potential insolvency situation,  

please get in touch.  

This article does not constitute legal advice. If you need any help or further information in relation to administration, liquidation or any other type of insolvency, please contact us on 0113 266 0735 or at info@bailoransolicitors.com to speak to one of our legal experts.