About Administration

What happens when a company is in Administration?

Once a company is in administration the administrator, rather than the directors, is in control of the company and no creditors can take any action to recover their money (except in very rare circumstances). The administrator’s role is to try to achieve the best possible outcome for creditors.

The administrator will usually adopt one of the following approaches, depending on the circumstances:

• Continue to run the business whilst trying to sell all or part of it.
• Continue to run the business for a short period of time whilst preparing a company voluntary arrangement proposal or some other agreement with creditors to defer or reduce their debts.
• Sell the business immediately (this is known as a “pre-pack”).
• Close the business and sell its assets, either to a single purchaser or via auction.

In addition to dealing with the creditors and trying to achieve the best possible outcome, the administrator also carries out a variety of other tasks. These include:

• Helping employees to make claims for the government for amounts owed to them such as redundancy pay, unless the business is sold as a going concern, in which case employees’ contracts will automatically move across to the new company so they will not need to claim from the government.
• Providing periodic reports to the creditors to advise them of what action has been taken during the administration and what the likely outcome will be.
• Investigating why the company filed and whether there has been any misconduct on the part of the directors or other parties.

At the end of the administration the company is either placed into liquidation so that funds can be distributed to creditors or it is simply dissolved.