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Administration is a formal insolvency procedure introduced by the Insolvency Act 1986.  Since its introduction the Government has amended the Act in line with the Government’s objective of promoting an Enterprise Culture with the aim of making the process of Administration simpler and less costly.  The objective of Administration is to provide the company with time to be able to organise its affairs so that a better return can be provided for its creditors than would occur if the company was simply wound up.

When should a company consider going into Administration?

  • The company must be insolvent which will normally mean that the company cannot pay its bills when they have fallen due for payment even if the company's assets may exceed its liabilities.
  • The insolvency practitioner recommending the process must be satisfied that the company has no viable prospect of recovering from its present difficulties.
  • The company must be insolvent which will normally mean that the company cannot pay its bills when they have fallen due for payment even if the company's assets may exceed its liabilities. The insolvency practitioner recommending the process must be satisfied that the company has no viable prospect of recovering from its present difficulties.
  • The company should have significant assets and cash flow and profitability should be predictable. Independent insolvency advice needs to be obtained to verify this is correct.
  • The company must be under serious pressure from its creditors. This may for example mean the company is facing threats of being wound up or court proceedings are being taken against the company or bailiffs are threatened.  The company may be under threat of being removed from its trading premises by the company's Landlord.
  • The insolvency practitioner appointed to advise the company and its directors recommends Administration as being likely to produce a better return than other procedures such as for example placing the company into creditors voluntary liquidation.


Because Administration is a regulated insolvency process only a licensed insolvency practitioner can be appointed as the company's Administrator.  Before the appointment takes place the insolvency practitioner must have worked with the company and its directors and be satisfied that Administration is an appropriate choice for the company and in the best interests of the company's creditors.

How does Administration Work?

When the company and its directors have concluded that the company should be placed into Administration the company arranges with the nominated insolvency practitioner to resolve that the company is placed into Administration.  The insolvency practitioner files the Notice of Administration with the Court and this operates to prevent any of the company's creditors taking further steps to enforce payment during the period of the Administration.

The Insolvency Practitioner becomes the Administrator of the company and replaces the company's directors which means that the directors are no longer in control of the management of the company.

Once a company is in Administration the company's creditors can no longer take or continue any actions against the company. This protects the company from being placed into compulsory liquidation and prevents creditors seizing any of the company's tangible assets.

In many cases the Administrator will take steps to sell the assets of the company either by selling these piecemeal or in some circumstances selling the assets of the business to a new company set up to take over the business of the company.  The Administrator is accountable to the company's creditors and the Court and must ensure that a fair price is obtained for the company's assets whenever they are sold.

The Insolvency Practitioner must report to the company's creditors within 8 weeks of being appointed so that the creditors obtain a clear picture of the company's financial position and have the opportunity to review and vote on the actions being taken by the Administrator.

The Administrator's report will be prepared following a full review of the company's financial position. The report will include a report detailing how the Administrator intends  to manage the company with a view to delivering the best outcome for the company's creditors.

Administration is intended to last for a relatively short period of time but in practice many Administrations may last for a year or even longer (with the permission of the Court). When reporting to creditors the Administrator will recommend what should happen to the company at the end of the Administration.  This recommendation may for example be that the company proposes a Company Voluntary Arrangement to its creditors or enters into Creditors Voluntary  Liquidation.

Once a company has been placed into Administration it will become a matter of public knowledge as all creditors, customers and employees will be notified on all correspondence that the company is in Administration.

Although the company's directors may nominate their preferred insolvency practitioner as the Administrator the company's bank or another of the company's creditors may have the right to appoint their own Administrator.

Administration is an expensive process and if the process is to be used successfully for the benefit of the company's creditors the company must have sufficient cash flow to be able to pay the costs of the Administration.

Administration is a procedure only to be used as a last resort to try and ensure the survival of a struggling company or alternatively to try and ensure an improved return for creditors compared with the return which they may receive if the company is wound up.

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