A business going into administration does not automatically mean it is closing. Administration is a formal insolvency procedure that puts a licensed insolvency practitioner in control while they assess whether the company can be rescued, restructured or sold, or whether another outcome would provide a better result for creditors.
For directors, the important change is that control of the company passes to the administrator. The business may continue trading during this period, but the administrator decides what happens next based on the company’s finances, assets, creditors and prospects.
Could administration protect your business?
If your company is facing serious creditor pressure but there is still a viable business underneath the debt, administration may be one option. We can review your position and explain whether administration, a CVA, liquidation or another route is realistic.
What Does It Mean When a Business Goes Into Administration?
Administration is a formal insolvency process in which a licensed insolvency practitioner is appointed as the company’s administrator. The company receives legal protection from most individual creditor action while the administrator takes control and considers what outcome should be pursued. During administration, creditors are generally restricted from winding up the company or taking certain legal action without the required consent or permission.
The purpose of administration is governed by a statutory hierarchy. Under Schedule B1 of the Insolvency Act 1986, the administrator must first consider rescuing the company as a going concern. If that is not reasonably practicable, they can instead seek a better result for creditors than would be likely in a winding up. If neither is possible, the focus can move to realising property for secured or preferential creditors.
That means administration is not simply about keeping a company alive at any cost. It needs to serve a recognised insolvency purpose.
Administration is one of the formal procedures included in monthly company insolvency data. You can see recent administration and insolvency statistics in our updated hub.
Administration at a Glance
| Administration | |
|---|---|
| Who controls the company? | The administrator |
| Can it keep trading? | Potentially |
| Creditor protection? | Yes, through a statutory moratorium |
| Main purpose | Rescue or a better creditor outcome |
| Normal maximum duration | 12 months unless extended |
| Possible outcome | Rescue, CVA, business sale, liquidation or closure |
When Might Administration Be Suitable?
Administration tends to be considered where there is still something worth protecting. For example, the business may have viable contracts, employees, goodwill, stock or other assets, but historic debt or immediate creditor pressure is putting that underlying value at risk.
It may be relevant where:
- the core business could remain profitable once historic debt is addressed
- a creditor or lender is threatening serious enforcement action
- a winding-up petition places the company at risk of compulsory liquidation
- a sale as a going concern could preserve more value than a break-up
- the company has contracts or customer relationships worth protecting
- secured lenders are considering enforcing their security
- a restructuring or refinancing needs a formal framework
Administration is not automatically the best choice whenever a company becomes insolvent. It is usually more complex and costly than a straightforward liquidation, so there needs to be a realistic objective behind using it.
If rescue is still realistic, business restructuring options may include informal measures as well as formal processes such as administration or a CVA.
Administration is not simply a way to delay creditors
Administration provides valuable protection from creditor action, but that protection must be used to pursue a proper administration objective. The administrator takes control of the business and must act in accordance with their statutory duties rather than simply following the directors' wishes. If there is no realistic prospect of rescue, restructuring or achieving a better result for creditors, another insolvency process may be more appropriate.
If creditor pressure is increasing, take advice before waiting for enforcement action to remove the options available.
How Does a Company Enter Administration?
There are several routes into administration. A company or its directors may appoint an administrator in appropriate circumstances. A holder of a qualifying floating charge may also have the power to appoint one, while administration can also arise through a court order.
The exact route for putting a company into administration depends on factors such as the company’s financial position, existing security and whether other insolvency proceedings have already started.
Administration is not something to arrange casually. A licensed insolvency practitioner needs to assess whether the statutory purpose of administration can realistically be achieved.
Not sure whether the business can be rescued?
Tell us a little about the company’s debts, assets and creditor pressure. Anderson Brookes can help you compare rescue and closure options.
What Protection Does Administration Give Against Creditors?
One of the main features of administration is the moratorium. This restricts creditors from taking certain enforcement and legal steps independently while the company is protected. For example, the moratorium can restrict:
- winding-up proceedings
- enforcement against company property
- certain legal proceedings
- repossession or enforcement action without the necessary consent or court permission
This breathing space gives the administrator an opportunity to assess the business without every creditor pursuing their own recovery strategy at the same time. That protection can be particularly important if the company is already facing a winding-up petition or pressure from a secured lender.
It is not, however, a permanent shield from debt. Administration needs to lead towards an outcome.
What Happens When the Administrator Is Appointed?
The early weeks of administration are important because the administrator needs to establish what the company is worth, whether it should continue trading and what creditors are likely to receive.
Control passes to the administrator
The administrator takes control of the company's affairs, business and property. Directors remain directors, but they cannot simply continue exercising management powers independently of the administrator.
Creditors and Companies House are notified
The administrator notifies relevant parties of the appointment and publishes the required notice. Suppliers, lenders, employees and other creditors can then understand who is controlling the company.
The company's position is assessed
The administrator reviews matters such as:
- cash flow
- assets
- debts
- secured lending
- contracts
- employees
- ongoing trading
- potential buyers
- restructuring possibilities
They may continue trading where doing so is considered appropriate.
Administration proposals are prepared
The administrator normally has eight weeks to issue proposals explaining how they intend to achieve the purpose of administration. These proposals are sent to creditors and other relevant parties.
Creditors consider the proposals
Where creditor approval or a decision is required, the relevant statutory decision procedures are used. The process should therefore not be thought of simply as an old-style physical creditors' meeting.
The strategy is implemented
The next stage could involve continued trading, restructuring, a CVA, a business sale or eventual liquidation.
What Happens to Directors During Administration?
Directors do not automatically lose their office when administration begins, but they do lose normal control over company management. The administrator decides how the business is run.
Directors may still be asked to assist with matters such as:
- explaining company records
- providing information about assets and liabilities
- dealing with customers or suppliers
- helping maintain business continuity
- supporting a sale process
Directors must co-operate with the appointed office-holder and provide relevant company information and paperwork.
Administration does not itself mean a director has done anything wrong. Companies become insolvent for many reasons. However, director conduct can still be reviewed as part of a formal insolvency, so records should be preserved and unusual transactions should not be carried out simply because administration is being considered.
What Happens to Employees?
Employees do not automatically lose their jobs when a company enters administration. The administrator may continue operating the business, which can mean some or all employees remain working while restructuring or a sale is explored.
Other employees may be made redundant if roles are no longer required or the company cannot support the cost.
Possible outcomes include:
- remaining employed by the company during administration
- redundancy
- transfer to a buyer if the business is sold
- retention of a smaller workforce during restructuring
Where employees lose their jobs because their employer is insolvent, they may be able to claim qualifying redundancy pay, unpaid wages, holiday pay and statutory notice pay from the government.
For redundancies on or after 6 April 2026, the government’s insolvency payment limits generally cap relevant weekly payments at £751.
What Happens to Suppliers and Contracts?
The administrator reviews the company’s commercial arrangements as part of deciding whether continued trading, restructuring or a sale is realistic. That can include:
- supplier agreements
- customer contracts
- property leases
- vehicle or equipment finance
- software subscriptions
- utilities
- major service contracts
Some contracts may be commercially essential because losing them would destroy the value of the business. Others may be unaffordable or no longer necessary. The administrator therefore decides which relationships need to continue and may seek to renegotiate or terminate contractual arrangements where legally possible.
Suppliers may also change the terms on which they are willing to continue trading with the company, particularly where pre-administration invoices remain unpaid.
Can the Business Be Sold Through a Pre-Pack Administration?
Potentially. A pre-pack administration involves arranging the sale of all or part of the business before the administrator is formally appointed, with the transaction completed shortly afterwards.
It can be useful where delay would rapidly damage goodwill, customer relationships or the value of the business. A buyer might be an independent third party. In some situations, a director or another connected person may also seek to acquire the business.
There are additional safeguards where a substantial disposal is made to a connected person during the first eight weeks of administration. Current Insolvency Service guidance on connected-person sales explains that the administrator generally needs either creditor approval or to have received and considered a qualifying evaluator’s report.
What Can Happen at the End of Administration?
Administration can lead to several different outcomes.
The company is rescued
The strongest outcome is that the company itself survives and eventually leaves administration as a going concern. This is not possible in every case.
A Company Voluntary Arrangement is agreed
A Company Voluntary Arrangement can allow a viable company to deal with historic unsecured debt through a formal agreement with creditors while continuing to trade.
The business is sold
The administrator may sell the business or parts of it to another company. That can preserve trading operations, customer relationships and potentially employment even where the original company itself does not ultimately survive.
The company moves into liquidation
If rescue or restructuring is no longer realistic, liquidation may follow. A Creditors' Voluntary Liquidation is focused on winding up an insolvent company, realising its assets and bringing its affairs to an orderly close.
The company is eventually dissolved
Depending on the circumstances and assets remaining, administration can also conclude with the company progressing towards dissolution. Administration normally ends automatically after 12 months unless it ends sooner or the term is properly extended.
Administration vs Liquidation
The two procedures are both forms of corporate insolvency, but their purposes are different.| Administration | Creditors’ Voluntary Liquidation | |
|---|---|---|
| Primary purpose | Rescue or achieve a better creditor outcome | Wind up an insolvent company |
| Can trading continue? | Yes, potentially | Usually stops |
| Who takes control? | Administrator | Liquidator |
| Creditor protection | Statutory moratorium | Different liquidation protections apply |
| Can the business be sold? | Yes | Assets or business may still potentially be sold |
| Likely outcome | Rescue, restructuring, sale or later closure | Company ultimately closes |
What Should Directors Do if Administration May Be Needed?
If administration looks like a realistic possibility, early preparation can preserve options.
1. Get advice early
Administration is much easier to assess before cash has completely run out or critical assets and contracts have been lost.
2. Identify immediate creditor threats
Tell the insolvency practitioner about statutory demands, court claims, enforcement action, winding-up petitions or pressure from secured lenders.
3. Check secured borrowing
Identify debentures, floating charges and other security over company assets.
4. Preserve company assets and records
Keep accounting information, contracts, bank statements, asset records and creditor details accessible.
5. Avoid unusual transactions
Do not move assets, repay connected parties or make unusual payments simply because insolvency appears likely.
6. Prepare realistic financial information
Current management accounts and credible cash-flow forecasts help establish whether the underlying business really is viable.
7. Compare administration with the alternatives
Administration, a CVA and liquidation solve different problems. The right choice depends on what remains viable and what creditors are likely to receive.
Facing serious creditor or lender pressure?
Administration tends to work best when there is still business value worth protecting. Speak to us before enforcement action, loss of key contracts or exhausted cash reserves reduce the options available.
Business Administration FAQs
Does going into administration mean the company closes?
No. The business may continue trading while the administrator assesses its future. Possible outcomes include company rescue, a CVA, a sale of the business or eventual liquidation.
How long does company administration last?
Administration normally ends within 12 months, although it can finish sooner or be extended in accordance with the insolvency legislation.
Can directors still run the company during administration?
The administrator takes control. Directors can continue assisting the business, but they cannot exercise management powers independently where the administrator has not authorised them to do so.
Can creditors still chase a company in administration?
Administration introduces a statutory moratorium that significantly restricts individual creditor enforcement and legal action. This gives the administrator time to assess and implement an appropriate strategy.
Do employees automatically lose their jobs?
No. Employees may continue working while the company trades or seeks a buyer. Redundancies can still occur where roles cannot be retained.
Is administration the same as liquidation?
No. Administration is primarily intended to pursue rescue or a better outcome for creditors. Liquidation focuses on realising assets, dealing with creditor claims and closing the company.
Can the directors buy the business back?
Potentially. Directors or another connected party can sometimes acquire the business or assets, but the transaction must be handled properly and connected-party sales during the first eight weeks of administration are subject to additional safeguards.
Find Out Whether Administration Is Realistic for Your Business
Administration can be extremely useful where a business still has genuine value but urgent creditor pressure is putting that value at risk. It is not, however, appropriate for every insolvent company. The important question is not simply whether administration is available. It is whether it can achieve something worthwhile.
At Anderson Brookes, we can review your company’s trading position, debts, assets, creditor pressure and prospects before comparing administration with alternatives such as restructuring, a CVA or liquidation. If rescue is realistic, getting advice early can help preserve options. If it is not, acting promptly can still give directors more control over how the company’s difficulties are addressed.
Call Anderson Brookes on 0800 1804 935 for free, confidential initial advice.