It has recently been revealed that Club La Costa, which was in administration, has transitioned into the liquidation process. The FRP Advisory administration was officially terminated on November 20th 2022, and following that, the process shifted from administration to a new phase called liquidation (specifically, creditors’ voluntary liquidation). The process is still being managed by the original team at the FRP Advisory.
The History
Back in November 2020, the timeshare company Club La Costa went into administration. An administrator was appointed, and since then, the company has been subject to the necessary checks to understand the financial position of the company better and plan a route forward (if there is one). They came under scrutiny due to the fact they owed tens of millions of former customers compensation because they ignored the Spanish consumer laws for well over a decade. For six years prior to administration, the Spanish legal system had been taking actions against the company, which they have since been unable to keep up to date with.
What is Administration?
When a company goes into administration, it means that it becomes insolvent, and as such, licensed practitioners are appointed to manage the company’s finances. The directors are able to appoint their own practitioners to better look after the needs of their company, but these administrators need to be appointed through a court process.
A company will go into administration if they are facing serious problems with its cash flow and have come under threats from its creditors. There has to be a purpose behind the administration process. For instance, a lot of the time, when a company goes into administration, there is hope that the organisation will be saved.
What is Liquidation?
Liquidation in the world of economics and finance is the process involved in bringing a business to an end and distributing the remaining assets that that business has to the necessary claimants. This usually happens when an organisation is insolvent, and there is little chance the company is going to be able to pay the remaining assets it owes or recover from the position that it is in.
It is worth noting that the term liquidation could also be used in business when an organisation sells poor quality products at a low price, to the point it does not meet the business’s needs. You may come across the use of the term liquidation at some point, but for the purpose of this article, we will be referring to the first meaning.
Highlighting the Difference Between Administration and Liquidation
There is a clear difference between administration and liquidation which highlights the current position that Club La Costa finds itself in. When a company is in administration, there is still a chance of the business surviving as there are different loans that can be taken and clever business strategies that can be implemented to make the business solvent again.
Contrast this with liquidation, which is an avenue that is normally used when trying to lower the debt of a business as much as possible before bringing a company to an end. When a company enters liquidation, it usually does so under the guise that it will be closing its doors and trying to pay as much back to its creditors as it possibly can in the process.
What Does Club La Costa’s News Mean for Creditors?
In terms of process, creditors will see no difference. This applies to investors who have provided the organisation with finance but then also to any individuals who are awaiting some kind of court settlement. So long as the documents were originally filed during the administration process and successfully submitted, they are going to transfer to the liquidation process automatically. The conversion process that Club La Costa underwent to go from administration to liquidation is routine and legally correct.
There will be no difference noticed by the company directors as well. They are investigated in both administration and liquidation so this is going to remain the same despite the transition.
Granted, the news might seem like a blow, given it shows little faith in the business bouncing back; however, there are positives to be taken from this as well. A lot of the time, when a business is in an uncomfortable financial position, the process of administration can be dragged out, and the move into liquidation shows progress in the case as we move towards a swift outcome that benefits everyone as much as possible.
Comments Made by the ECC
The ECC made comments about the move into liquidation recently and they were all positive. Andrew Cooper, the CEO of the ECC (European Consumer Claims), said he and the team were excited about the news that Club La Costa would be moving into liquidation. They remain optimistic that they will recover a substantial amount of funds in order to help pay creditors as much as possible.
Andrew also commented on the process in general, noting that it would have been simple for the practitioners to end the administration process and leave matters there. Instead, the fact that they have instead moved the company into liquidation shows that they still have a plan on how to recover more funds, and they have further matters that they wish to investigate.
Finally, Andrew acknowledges the additional time that the transition adds and states creditors are just going to need to be a bit more patient and have faith in the process.
Do You Need Help from Licensed Practitioners?
When a company is placed into administration, there is still hope that that company can be rescued and become solvent once again. Once a company is placed into liquidation, this indicates that the organisation will be coming to a close. As such, if you need to go into administration, it is important you work with licensed practitioners who have the interests of both your creditors and your business in mind. Our team at Simple Liquidation will be able to assist with this. If you require further information or have questions about the administration/liquidation process, do not hesitate to get in touch.
