Intent to file administration by rugby club Wasps - What does it all mean?Posted: Sep 23, 2022

What does ‘intent to appoint administrators’ mean?

If you have been keeping up with the news recently you probably saw that Wasps filed notice with the high court that they intended to appoint administrators. So, what does that actually mean?

As the name suggests, this is a document saying that they intend to appoint an Administrator. Normally this is because notice must be given to certain creditors.

An Administrator, who must be a licensed Insolvency Practitioner, can be appointed to run a company and take control of the assets in an attempt to stop the company from being wound up (forced to close) by its creditors. If they feel the company can be rescued and return to a position where it is able to trade and become solvent, then they will set about arranging for that to happen. Or alternatively, the assets of the business may be sold to another party. If they can’t then they will ensure that the company’s assets are fairly distributed amongst the creditors. In either case, the Insolvency Practitioner that is acting as Administrator has 8 weeks to produce a report detailing their intended actions. 

This all sounds rather dramatic and, in financial terms, it rather is. The club has clearly had some financial problems, and judging from the reports, it seems to be acting in response to a threat of a winding up order from HMRC. When a winding up order is issued and advertised, the bank will normally freeze the account of the affected company. No bank account really means no trading. So, while intent to appoint administrators isn’t the last straw, it is also not exactly a good sign.

In this case, the reason Wasps have filed with the high court is likely to get a breathing space in which to assess, regroup and find a way to move forward. Once the intent to file for administration is issued it effectively stops any further action being taken by creditors and will also freeze any progression of current action. This creates a valuable breathing space so the company and its advisors can negotiate with creditors to come up with a solution and a plan for the business.

What now?

If an administration order is issued it will usually result in one of three things

1. A significant part or all of the business will be sold to potentially raise capital
2. The assets will be realised (sold) in a way that will benefit the creditors more than would occur if this was part of a liquidation
3. An Administrator could be appointed on behalf of a charge holder(s)

It should be noted that a suitable Insolvency Practitioner will already be assisting the director and Company in order to try to find the best resolution. Hopefully, for the club and the fans, this will mean the rugby will continue. Without further information though it is difficult to see the extent of the debts and whether it is still a viable business proposition.

What can we take from the situation with Wasps?

The fact that a major club like Wasps can be in danger of liquidation may well be a signpost for more to come. The has already been a similar financial crisis at the Worcester Warriors so let’s hope this is not a pattern emerging.

That said we do need to face facts. As I am writing only hours after the Bank of England raised interest rates to the highest in over a decade and they are forecasting a recession in Q4. That is going to hit some businesses hard.

HMRC, as we can see from the report about WASPS, is actively pursuing debt again. Wasps have entered into discussions with them in the past and clearly, they at least made some headway. We have been used to the gentler approach throughout the recession though and it seems this is now not such a priority for the Revenue service. So while HMRC is still very accommodating and understanding, they will want paying. If you owe money to them, try to arrange a payment plan, or at least speak to them. If you think that you are not able to pay them at all then it is probably best to book an appointment with us to talk about your position. 

Wasps and Warriors may be the high profile pilot fish warning of a tough time ahead. We all hope not, and the government is moving to hopefully stave off some of the crisis, but we all need to be ready just in case the worst comes. Be optimistic but be realistic and be prepared for hard times.

There is a fine line between optimistic and burying your head in the sand though. Allowing the hope that things will improve to cloud your view of a real problem is a dangerous path. If you are struggling financially, you must act. Speak to us, speak to your accountant, but under no circumstances ignore the situation if things are looking bad.