Companies increase their risk of failure but not seeking help to prevent insolvency.
Administrator and insolvency expert Neil Bennett of Leonard Curtis warned company directors: “Take advice as early as possible. The options narrow when you leave it to the last point and it is difficult to protect customers.
“The administration procedure can provide protection from creditors in the short-term. The earlier we get in the better.”
UK companies can enjoy some breathing space from creditors – enjoying protection for 10 working days without becoming insolvent – if they file notice of their intention to appoint an administrator.
Once in administration, creditors form a queue.
Secured creditors, such as banks, are paid first, followed by preferred creditors – such as employees – who may miss out. Unsecured creditors, such as suppliers, come last and can expect little.