Understanding how company administration works, its pros, cons, and whether it's the right option for your business situation
Company administration is a formal insolvency procedure designed to rescue companies in financial distress. It provides breathing space and protection while exploring recovery options.
A statutory procedure under the Insolvency Act 1986 where an administrator takes control of a company to achieve specific objectives.
To rescue the company as a going concern, achieve better results for creditors than liquidation, or realize assets.
Initially lasts for one year but can be extended by the court or creditors if necessary for the administration objectives.
The administrator must pursue these objectives in order of priority as set out in the Insolvency Act 1986
Rescue the company as a going concern - Preserve the business, jobs, and value for all stakeholders
Achieve better results for creditors - If rescue isn't possible, maximize creditor returns compared to liquidation
Realize property for secured creditors - If other objectives aren't achievable, sell assets to pay secured creditors
Understanding both the advantages and disadvantages of administration is crucial for making informed decisions about your company's future.
Automatic stay on legal proceedings, enforcement actions, and winding-up petitions. Creditors cannot take action without court permission.
Company can continue trading, maintain customer relationships, and preserve going concern value while restructuring.
Employees can be retained, contracts honored, and redundancy costs minimized through successful business rescue.
Often achieves higher returns for creditors compared to immediate liquidation by preserving business value.
Allows for debt restructuring, asset sales, business transfers, and other recovery strategies under professional management.
Directors lose control of the company. Administrator makes all key decisions about operations, strategy, and future.
Administrator fees, legal costs, and court expenses can be substantial, reducing funds available for creditors.
Administration is a public process that may damage business reputation and relationships with customers and suppliers.
Limited timeframe to achieve objectives. Pressure to make quick decisions that may not be optimal long-term.
Administration may not achieve rescue objectives, potentially leading to liquidation with additional costs incurred.
At a glance comparison of key factors
Viable businesses with temporary cash flow issues, valuable assets, or strong market position
Companies with uncertain viability, high costs relative to assets, or damaged reputation
Companies with no viable business, insufficient assets, or where liquidation would be more beneficial
Understanding each stage of the administration process helps you prepare and know what to expect throughout the procedure.
Professional evaluation of the company's financial position, viability, and suitability for administration. This includes reviewing accounts, cash flow, assets, and potential for rescue.
Submit administration application to court with supporting evidence. Can be filed by the company, directors, or creditors with proper standing and evidence of financial distress.
Court reviews the application and decides whether to grant the administration order. Judge considers company viability, creditor interests, and proposed administrator's qualifications.
Qualified insolvency professional takes control of the company. Moratorium begins immediately, providing protection from creditor actions and legal proceedings.
Administrator develops and implements strategy to achieve administration objectives. This may include restructuring, asset sales, business transfers, or operational changes.
Administration concludes through various exit routes: successful rescue and return to directors, company voluntary arrangement, sale as going concern, or liquidation if objectives cannot be achieved.
Understanding the timeframes involved in administration
2-4 weeks for assessment and preparation
1-3 weeks from application to hearing
Up to 12 months (extendable)
2-8 weeks depending on exit route
Get answers to the most common questions about company administration procedures, costs, and outcomes.
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The process of entering administration, from initial assessment through to appointment and beyond.
Administration should be considered when:
You need to appoint a licensed insolvency practitioner (IP). This can be done:
Most common route. Directors pass a board resolution appointing an IP.
If a bank holds a floating charge over company assets.
On application by company, creditors, or other entitled parties.
Before the administrator is appointed, gather essential documents:
The administrator must file notice at Companies House within 11 days of appointment using Form AD01.
From the moment of appointment, the moratorium begins. Creditors cannot take action without court permission.
Within 14 days, creditors must be notified of:
Within 8 weeks, the administrator must send creditors proposals for achieving the purpose of administration. These may include:
Is administration right for your business?
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