Rangers go into Administration

Wednesday 15 February 2012

Administration allows for the reorganisation of a company or the realisation of its assets. It usually follows soon after a company becomes insolvent. The process takes place under the protection of a moratorium, which prevents creditors from enforcing their claims against the company.

When a company enters administration, an insolvency practitioner is appointed as the company’s administrator. The administrator then takes over the control of the company’s business and assets from the company’s directors, with a view to carrying on trading in the first instance.

Purposes of Administration

The administration of a company must achieve one of the following objectives:

• The rescue of the company as a going concern (the primary objective).
• The achievement of a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration) (the second objective)
• The realisation of some or all of the company’s property to make a distribution to one or more secured or preferential creditors (the third objective)

An administrator must attempt to achieve the objectives of administration in this order.

In the context of Glasgow Rangers, the administrator must firstly pursue the primary objective. Having obtained a moratorium, it has been proposed that the administrator seeks to reach a voluntary arrangement with the company’s creditors. Such an arrangement is sought in order for the company and the creditors to reach a compromise that is as beneficial to both parties as possible. If successful, ultimately such an arrangement would allow the company to carry on trading.

Failure of Administration

If the administrator is unable to keep the company trading, then the company usually enters liquidation. This means that the assets of the company are sold off to realise any remaining funds, to be distributed to the creditors in the order of their security. However, unlike administration where the company can be saved, liquidation results in the dissolution of the company.