Company administration
What administration is intended to achieve
Administration places the company under the control of an insolvency practitioner acting as administrator. It has statutory objectives and is not simply an informal agreement to delay payments.
Depending on the circumstances, the outcome may involve rescuing the company, selling the business or achieving a better result for creditors than an immediate winding up. It does not guarantee that the company itself survives.
What changes for directors
The administrator takes control of the company’s affairs and assets. Directors must provide information and cooperate. Decisions about continued trading, staff, contracts and a sale are made within the formal process.
Administration can provide protection against certain creditor action, but appointment requirements, timing and the scope of protection need professional assessment. Telling a creditor that administration is being considered does not itself create a moratorium.
Assess suitability before choosing the process
Consider the value of the operating business, the funding needed to trade, secured lending and the likely costs of the procedure. An administration needs a credible purpose and appropriate resources.
- Is there a business or asset value worth preserving?
- Who controls funding and holds security?
- Can trading costs be met while options are assessed?
- Are legal proceedings or enforcement already underway?
Prepare for an initial review
Bring a cash forecast, asset list, lending agreements and information about staff and major contracts. Identify any prospective buyer and whether that buyer is connected to the directors.
The initial discussion should compare administration with a CVA, negotiated restructuring and liquidation. Costs and expected outcomes should be considered together, rather than choosing a process by name.
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Common questions
It may, if the administrator considers that appropriate and trading can be funded. Continued trading is not automatic.
No. Administration and liquidation have different purposes and procedures, although an administration can ultimately be followed by liquidation.
No. The formal appointment requires an appropriately authorised insolvency practitioner and compliance with the relevant procedure.
Further reading: official GOV.UK guidance. General information; procedures and advice depend on your circumstances and jurisdiction.