HOUSE of Fraser has become the latest large company to make headlines for going into administration with 2,000 jobs at stake.
This comes after the Gaucho Group went bust in July. Here’s what calling in the administrators means…
Rex Features The troubled restaurant group could face the loss of 1,500 jobs.
What does going into administration mean?
When a company enters administration, all control is passed to an appointed administrator.
The administrator must be a licensed insolvency practitioner.
Their goal is to leverage the company’s assets and business to repay creditors.
Once the administrator has taken over, a moratorium is placed around the company and stops all legal actions.
After the administrator takes over, there isn’t much that can be done to reverse the process.
Between April and June 2017, there were 337 administrations in the UK.
What does going in liquidation mean?
Liquidation is slightly different to administration.
Where administration aims to help the company repay its debts, liquidation is the process of selling all assets being then dissolving the company completely.
This essentially means that liquidation signals the end of the business it ceases to trade and all assets are ‘liquidated’ into cash.
How does administration work?
The administrator will write to your creditors and Companies House to say they’ve been appointed.
They will try to stop the company being liquidated but if they can’t, the administrator will pay as much of a company’s debts as possible from the assets.
The administrator has eight weeks to write a statement explaining what they plan to do.
This must be sent to creditors, employees and Companies House and invites them to approve or amend the plans at a meeting.
What can the administrator do?
According to gov.uk, the administrator could:
negotiate a Company Voluntary Arrangement (CVA) so your company can keep trading sell your business as a ‘going concern’ to another company – meaning your business can carry on, eg by keeping its clients, workforce or orders sell your assets as part of a creditors’ voluntary liquidation, pay your creditors from any money raised and close your company close your company if there’s nothing to sell administrator has control over your business during administration, so they can cancel or renegotiate any contracts you have or make employees redundant.
Which UK companies have gone bust?
Russell Hume is the latest firm to go bust in the UK.
A number of familiar high street names have hit the rocks in recent years
House of Fraser announced in early August that 31 of its 59 stores would be closing by January 2019. This means 2,000 jobs are at risk – along with over 4,000 of its brands and concessions. It’s now been confirmed that Sports Direct owner Mike Ashley has bought the company. Gaucho restaurant group prepared to file for administration in July 2018 facing the loss of 1,500 jobs. The Argentinian restaurant had been in talks with potential buyers since May 2018. TOYS R Us went into administration earlier this year. The company, for many years a household name in retailing, faced the loss of 3,000 jobs. Woolworths – in 2008, the budget store closed its doors putting 30,000 workers out of a job and ending 100 years of history. JJB Sports – sports store collapsed in 2012 with debts of around £150million. Comet – the electrical chain went under in 2012 after 80 years of business. Blockbuster – the video and DVD rental store struggled to compete with online streaming services and called in the administrators twice in 2013. BHS – the high street stalwart went into administration in April 2016. Phones 4U – the company was forced to pull the plug in 2014 at a loss of 5,596 employees. P&H – the wholesaler, which supplies Tesco and Morrisons with tobacco, called in administrators in November 2017 after a potential takeover fell through. Carillion – the major construction firm entered liquidation after failing to restructure its debts. Pizza chain Prezzo also announced plans to close 100 restaurants putting hundreds of jobs at risk, this morning. Fashion retailer New Look is looking at plans to close 60 stores in the UK, with its owners considering a possible Company Voluntary Arrangement (CVA) which will allow it to restructure its business and pay-off its debts. House of Fraser is also reported to be considering axing a number of its stores after a tough Christmas trading period. Bargain Booze and sister brands Wine Rack, Bibendum and the Wetherspoon supplier Matthew Clark are at risk as well as 2,500 jobs. Palmer and Harvey (P&H) is the UK’s largest tobacco supplier which supplies Tesco and Morrisons has also gone into administration.