Administration & Liquidation (non-Yam content)

[theonlywayisup]

Isn't it about time that Hibs.net had a financial forum. It seems better informed than most.

Anyway, I must admit that I am not really clear on the Administration versus Liquidation route, so did a bit of an internet search. I can find text on administration, but nothing much on Liquidation.

ADMINISTRATION: In the United Kingdom, football clubs sometimes choose to enter administration when they are unable to pay off outstanding debts. Under the Insolvency Act 1986, a business will face a winding-up order bringing them to court and if it is shown that a business cannot pay debts as they fall due or cannot repay outstanding debts then the company will be classified as insolvent. Administration puts accountants "in charge of pretty much everything apart from coaching the players and picking the team". For a football club in administration, the "football creditors rule" requires football-related debts such as wages owed to players and staff, and transfer fees owed to other clubs to be paid first.


What happens to the debt? Is it written off? How is Liquidation different?

NOTE: can we keep this devoid of comments about the Yams and it would be good to keep it from being merged with the Yams-mega thread?

[SmashinGlass]

Isn't it about time that Hibs.net had a financial forum. It seems better informed than most.

Anyway, I must admit that I am not really clear on the Administration versus Liquidation route, so did a bit of an internet search. I can find text on administration, but nothing much on Liquidation.

ADMINISTRATION: In the United Kingdom, football clubs sometimes choose to enter administration when they are unable to pay off outstanding debts. Under the Insolvency Act 1986, a business will face a winding-up order bringing them to court and if it is shown that a business cannot pay debts as they fall due or cannot repay outstanding debts then the company will be classified as insolvent. Administration puts accountants "in charge of pretty much everything apart from coaching the players and picking the team". For a football club in administration, the "football creditors rule" requires football-related debts such as wages owed to players and staff, and transfer fees owed to other clubs to be paid first.


What happens to the debt? Is it written off? How is Liquidation different?

NOTE: can we keep this devoid of comments about the Yams and it would be good to keep it from being merged with the Yams-mega thread?

Liquidation is different as it is a method of winding up a company's affairs. Administration is primarily a rescue mechanism. The debts are settled in the priorities laid out in the relevant insolvency legislation, once the insolvency practitioners fees and outlays have been deducted, of course. If there is any amounts left outstanding to creditors, these will be written off under a liquidation, although not necessarily under an administration, depending upon the exit route. In a cva, it is possible to have part of the company's debts written off.

[blairwallace]

so how does a team come out of administration and at what point does being in administration turn into liquidation?

[Hibercelona]

A club comes out of Administration when things are "stabilised". In other words, there's a plan in place which will allow the club to cut down on the debt figure over an agreed period of time with the lenders, while managing to maintain stability.

A club goes into Liquidation when stability can't possibly be achieved, regardless of the plans put forward.

Administration is "Check". Liquidation is "Check Mate".

[Mister P]

Very useful thread, I've been asking myself these exact questions.

[theonlywayisup]

Cheers for all the responses.

So under administration, the rescue plan would still involve one to repay the debt. Is that the case? I had believed that the debt would be cleared. If that is not possible, liquidation follows.

Also, what happens to the owners of the company under administration?

[_hucks_]

Cheers for all the responses.

So under administration, the rescue plan would still involve one to repay the debt. Is that the case? I had believed that the debt would be cleared. If that is not possible, liquidation follows.

Also, what happens to the owners of the company under administration?

The administrators will look to agree a pence in the pound deal with the creditors, known as a CVA. This can be accepted ir rejected by the creditors, but it is a way of paying back less debt than has been accrued (and, for the creditors, a way of seeing at keast something back od the debt that they may fear they'll see very little of).