A guide, not advice. This explains how things generally work. A licensed insolvency practitioner will tell you what applies to your company or to you.
What Is Company Administration?
Company administration is a formal insolvency procedure designed to rescue a business that is, or is likely to become, insolvent. When a company enters administration, it gains a legal moratorium - an automatic freeze that stops creditors (including HMRC and landlords) from taking enforcement action or petitioning for the company to be wound up.
An administrator - a licensed insolvency practitioner - takes control of the company with the goal of achieving one of three statutory objectives, in order of priority:
- Rescuing the company as a going concern
- Achieving a better result for creditors than an immediate liquidation
- Realising property to make a distribution to secured or preferential creditors
When Is Administration the Right Option?
Administration may be appropriate when:
- The business is fundamentally viable but faces short-term cash pressure
- A key creditor is threatening enforcement (for example, a winding-up petition or landlord distraint)
- You need time to negotiate with creditors or find a buyer
- The business can be sold as a going concern, preserving value and jobs
Administration is a rescue tool, not an end in itself. Where rescue is not possible, the administrator may sell the business and assets, often via a pre-pack sale, before the company moves to liquidation.
The Administration Process
- Filing the notice - The directors (or a qualifying floating charge holder) file a notice of intention to appoint an administrator at court.
- Administrator appointed - The administrator takes control and the moratorium begins.
- Assessment and proposals - The administrator assesses the business and puts proposals to creditors within eight weeks.
- Implementation - Proposals are implemented - rescue, sale, or winding down.
- Exit - The company exits administration, typically to liquidation, dissolution, or a return to directors' control.
Protection for Directors
During administration, directors lose day-to-day control, but the moratorium protects the company from creditors. Administration also allows directors to demonstrate they have acted responsibly and in the interests of creditors once insolvency was apparent.
Speak to a Licensed IP
If your business is under pressure, early advice is critical. Our Manchester-based, ICAEW-licensed practitioners will tell you honestly whether administration is the right option - or whether an alternative such as a CVA or restructuring would serve you better.