What is administration?
- A procedure allowing for the reorganisation of a company or the realisation of its assets under the protection of a statutory moratorium.
- Mainly used for insolvent companies.
- Governed by Schedule B1 of the Insolvency Act 1986 (IA 1986).
- The administration must aim to achieve one of the following objectives:
- to rescue the company as a going concern; or
- to achieve a better result for the creditors than would be likely if the company were wound up; or
- to realise property to make a distribution to one or more secured or preferential creditors.
Routes into administration
- By court order, made in an open hearing, upon a formal application to court (the court route); or
- By the filing of documents at court (the out-of-court route) by:
- The company.
- The directors.
- The holder of a qualifying floating charge.
| Advantages | Disadvantages |
| The administrator owes duties to all the creditors and not to a single creditor as in administrative receivership. | Administration often leads to the eventual liquidation of the company, and it may not be possible to secure the sale of the business. |
| There is a statutory moratorium freezing all actions by the creditors. | It can still be a lengthy and costly process. |
| The out-of-court route to administration is a quick and flexible option. | |
| Administrators, like liquidators can attack past transactions. | |
| The business may well be saved, in whole or in part, by sale or hive down (transfer of a business to a subsidiary). |
