How To Exit Company Administration

What happens to a company after administration?Exiting from administration is a process that allows a company to return to normal trading after experiencing financial difficulties. There are several options available for a company looking to exit administration, depending on its circumstances.

One option is to propose a Company Voluntary Arrangement (CVA), which is a legally binding agreement with creditors to repay a proportion of their debt over an extended period.

Another option is to seek a Pre-pack Administration, which involves the sale of the company’s assets to a third party before entering administration, and then using the proceeds to repay creditors.

Alternatively, the company may be able to exit administration through a sale to a buyer, either through a formal process such as a Creditors Voluntary Liquidation or by selling assets individually.

The best option for a company will depend on its specific circumstances, and seeking professional advice from an insolvency practitioner is recommended to determine the most suitable route out of administration

What happens to a company after administration?

After administration, the future of a company depends on the outcome of the administration process. If the company is able to exit administration, it can return to normal trading and continue as a going concern. However, if the company is unable to recover and repay its creditors, it may be placed into liquidation or receivership.

In liquidation, the company’s assets are sold, and the proceeds are distributed among its creditors according to their priority. In receivership, a receiver is appointed to sell the company’s assets, usually with the aim of repaying a particular creditor. If the company has any outstanding debt after the sale of its assets, the debt will be written off.

It is also possible that the company may be rescued through a sale to a buyer or through a debt restructuring process. Ultimately, the outcome of administration depends on the individual circumstances of the company and the decisions made by the appointed administrator or insolvency practitioner.

Gives a company breathing space

Administrative intervention serves as a beacon of hope for businesses facing financial challenges. It is a temporary measure that aims to provide a struggling company with the opportunity to revamp its fortunes or give outstanding creditors the best possible return on their investments.

The task of navigating through the complex process of administration falls to a licensed insolvency practitioner appointed to act as an administrator. They take the reins of the company, assess the situation and weigh up the options available for the future of the business.

The administrator may devise a rescue plan to help the company bounce back, or they may explore alternative routes to ensure creditors receive a more positive outcome, in the event that continuing to trade is not feasible. Ultimately, administration is a short-term solution that seeks to create long-term success.

Purpose of the administration

The administration process cannot be used to prop up a struggling company indefinitely, as it must serve a specific purpose. According to the Insolvency Act 1986, there are three “statutory purposes” that administration must fulfill, and at least one of them must be achievable for a company to enter administration.

  • The purpose is to rescue the company as a going concern
  • It is to achieve a better outcome for the company’s creditors than if it were to be liquidated without entering administration
  • Realise the company’s assets to make a distribution to secured or preferential creditors.

While in administration, the company is given legal protection through a moratorium that prevents creditors from taking legal action to recover debts. This period can be crucial in enabling the company to devise a rescue plan or to better realize the value of its assets. In short, administration is a means to an end, offering protection and time to help struggling companies achieve a better outcome.

Exit from company administration

Remaining in administration indefinitely is not a viable option for any company. The administrator has a duty to act as swiftly as possible, and ultimately the company must exit administration. The appropriate exit strategy will vary depending on the company’s specific circumstances, including its financial health and future prospects.

  • Continuation of trade

In some cases, the moratorium granted during administration gives the company enough breathing room to sort out its financial troubles through various means, such as selling assets, seeking additional funding, or coming to an agreement with creditors on repayment plans. If this occurs and the administrator determines that the company is stable again, control of the company is returned to the directors who can resume normal operations. In this scenario, the company is no longer considered insolvent.

However, for many companies, administration serves as a stepping stone to explore other insolvency arrangements that can help address their problems.

  • Company Voluntary Arrangement (CVA)

If a company is struggling with burdensome historical debts, but is otherwise performing well and has a promising future, a Company Voluntary Arrangement (CVA) could be the solution. This formal rescue process aims to enable the company to trade out of its financial distress by using future profits to pay off current debts.

Think of a CVA as a formal payment plan that a company agrees with its outstanding creditors. A licensed insolvency practitioner creates a payment schedule and presents it to the creditors. For the CVA to be accepted, at least 75% (by value) of the creditors must agree to the proposal. If the required number of creditors approves, the CVA becomes legally binding on all parties involved.

Once the CVA is in place, the insolvent company must make the agreed payments on time and in full, while the creditors must adhere to the payment plan and are not allowed to initiate legal action as long as the company complies with the terms of the CVA. In most cases, a portion of the company’s outstanding debt will be written off, and the company may also undergo some internal restructuring to reduce operational costs.

  • Creditors’ Voluntary Liquidation (CVL)

Although administration is commonly used to rescue struggling companies, it can also lead to Creditors’ Voluntary Liquidation (CVL), in which a company is liquidated voluntarily by its creditors. This process may be pursued if the administrator determines that the company is no longer viable and has little prospect of becoming profitable in the future. Alternatively, liquidation may have been the preferred course of action from the beginning, but opting for administration first would enhance creditor returns.

In cases where administration leads to liquidation, the liquidation process operates similarly to other CVLs. However, it is possible that the company’s assets may have already been sold as part of the administration process. If this is the case, entering into CVL allows the sale proceeds to be distributed among the creditors.

Frequently asked questions

Can you take a company out of administration?

Yes, it is possible to take a company out of administration through a process called company voluntary arrangement (CVA) or by finding a buyer through a pre-pack administration sale.

Can you use a CVA to exit administration?

Yes, a company voluntary arrangement (CVA) can be used to exit administration by proposing a repayment plan to creditors and seeking their approval to exit administration. If the CVA is approved and the repayment plan is followed, the company can exit administration and continue trading.


There are various exit routes available for businesses looking to survive after entering administration. One option is to seek a Company Voluntary Arrangement (CVA), which is a formal agreement between the company and its creditors to pay off outstanding debts over a period of time.

Another route is to restructure the business and negotiate with creditors outside of a formal insolvency process. In some cases, the administrator may recommend a pre-pack administration, where the company’s assets are sold to a new company, often led by the same directors, which can then continue trading without the burden of historic debts.

Finally, if none of these options are feasible, the company may enter into Creditors’ Voluntary Liquidation (CVL) as a means of winding up the business in an orderly manner and distributing any remaining assets to creditors.

Insolvency & Restructuring Expert at Business Insolvency Helpline | + posts

With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.