Administration and shares

[mgv8]

A company I have shares in has been up for sale for some time. Last week, it went into administration and was then sold (same day).

Why did they put it into administration for the sale to go through?
What, if any, effect will it have on the shares?

[BertBert]

It probably went into administration as it became insolvent. A buyer was obviously lined up, but perhaps needed protection from the business being wound up to be able to buy it.

You have probably sold your shares for extremely little or no value.

[Miserablegit]

Need more information but I’d hazard a guess the sale was a sale of the business and assets of the company to another company thereby leaving your company as a shell- the administrator will use the realisations of the sale to pay his fees and costs and the balance to possibly pay some of the creditors. Your shares have not been sold if this is the case but they are probably worthless.
The company will either be dissolved after administration or placed into liquidation.

As you were a shareholder of what was an insolvent company your shares are likely worthless. Had the company been solvent then the usual route (if a share sale wasn’t possible) would have been a Members Voluntary Liquidation (not to be confused with Creditors or Compulsory liquidations) which would have been the process to return value to the shareholders.

The liabilities remain in the old company (employment contracts are usually the exception) and the new owner gets to use the assets in the new entity. The process can be abused or “appear” to be abused but the Insolvency Act 1986 covers most of the misdemeanours.

Edited by Miserablegit on Monday 15th January 15:56

Edited by Miserablegit on Monday 15th January 15:57

[mgv8]

Thanks for the information so far:

The company went into administration and out within one day. From what I understand, all assets and name are trading again under the new owner.
We are getting more detail this week, and lucky I don't have that much cash in this, but if the new owner can do the right thing and my shares are still valid then it could pay off well in the long run.

[Austin_Metro]

https://find-and-update.company-information.servic...

As a first step, go on here and find out what has happened to the company you own shares in. The administrator will upload documents and reports.

Check the company number as the names can change.

[Alpinestars]

mgv8 said:

A company I have shares in has been up for sale for some time. Last week, it went into administration and was then sold (same day).

Why did they put it into administration for the sale to go through?
What, if any, effect will it have on the shares?

Are you sure the company in administration was sold? Or was its parent put into administration to effect the sale of the company you have shares in?

[alscar]

mgv8 said:

Thanks for the information so far:

The company went into administration and out within one day. From what I understand, all assets and name are trading again under the new owner.
We are getting more detail this week, and lucky I don't have that much cash in this, but if the new owner can do the right thing and my shares are still valid then it could pay off well in the long run.

It is exceedingly unlikely your original shares still even exist.
I’ve had a couple of similar investments ( VCT’s ) where the new owner has bought the name and whatever assets and carried on using the same name.
As a shareholder you unfortunately are at the bottom of the list when it comes to any creditors.

[DP14]

mgv8 said:

...but if the new owner can do the right thing and my shares are still valid then it could pay off well in the long run.

Do the right thing, absolve you of the 'risk' part of 'risk-reward'?!

[miniman]

It’s known as a “pre-pack” I think.

[Alpinestars]

miniman said:

It’s known as a “pre-pack” I think.

Looks that way. But a pre pack would be a sale of the assets of the company in Administration. Shares or non shares. The company in administration is not usually the company sold.

[Badda]

Your money has already gone.

[mgv8]

Thanks for the input, we need to see output from the administration and filing on the company house but expect to see a little pot of money to pay of some debt that would make the key people OK then everyone else down the chain if stuffed (like me).

It is a good company and its good news if it can keep going, but was just fun to be a part owner.

[MustangGT]

I am confused. You say the company you own shares in was sold? If so, perhaps you should have been contacted to sell your shares as well?

[alscar]

MustangGT said:

I am confused. You say the company you own shares in was sold? If so, perhaps you should have been contacted to sell your shares as well?

I think the company was actually put into administration so had technically or otherwise ceased to exist in its current guise at that point and then bought out of same to start trading again with a new owner and hence new share ownership but using the same name.

[Alpinestars]

alscar said:

I think the company was actually put into administration so had technically or otherwise ceased to exist in its current guise at that point and then bought out of same to start trading again with a new owner and hence new share ownership but using the same name.

The company does not cease to exist just because it goes into Administration.

The OP is not making sense and really needs to find out exactly what happened before anyone can advise as to the value of his shares.

[alscar]

Alpinestars said:

The company does not cease to exist just because it goes into Administration.

The OP is not making sense and really needs to find out exactly what happened before anyone can advise as to the value of his shares.

Indeed but in this case ( or at least from what I understand from the OP) it did just that.
I’m still going with the result that his shares are completely worthless now.

[Alpinestars]

alscar said:

Indeed but in this case ( or at least from what I understand from the OP) it did just that.
I’m still going with the result that his shares are completely worthless now.

Not possible for a company to “disappear” just because it’s in Administration. A company doesn’t cease to exist unless struck off or liquidated.

And it’s unclear what’s happened here. The most likely scenario is that, an Administrator was appointed over company he has shares in, assets prepacked to a newco, and “his” company left as an insolvent shell. It’s less likely, that the company he had shares in was sold after/during Administration. The former would mean the shares have no value, the latter, possible value.

[alscar]

Alpinestars said:

Not possible for a company to “disappear” just because it’s in Administration. A company doesn’t cease to exist unless struck off or liquidated.

And it’s unclear what’s happened here. The most likely scenario is that, an Administrator was appointed over company he has shares in, assets prepacked to a newco, and “his” company left as an insolvent shell. It’s less likely, that the company he had shares in was sold after/during Administration. The former would mean the shares have no value, the latter, possible value.

Noted - OP we will await your update when all clear.

[Forester1965]

It would be unusual (potentially unlawful depending on articles/shareholder agreement) for a company to do anything affecting the shareholders' shares without written communication before the event.

[mikeiow]

Forester1965 said:

It would be unusual (potentially unlawful depending on articles/shareholder agreement) for a company to do anything affecting the shareholders' shares without written communication before the event.

Was thinking this.
OP makes it sound like a same-day deal - fold & sold - which sounds very dubious to me!