This is a quick guide to give you an overview of the essential features of administration.

Following the enactment of the 2002 Enterprise Act, there are two main ways of trying to rescue or save all or part of a company that is in financial difficulties – these are by Company Voluntary Arrangement (CVA) or administration.

Administration

The purpose of administration, in order of priority, is:

  1. To rescue the company as a going concern, if that is not possible:
  2. To achieve a better result for the creditors as a whole as compared to a liquidation, failing that:
  3. To realise the company’s property in order to make a distribution to the company’s secured or preferential creditors.

A company is placed into administration on the appointment of an administrator. This can be done without a court hearing, by the directors, the company or by the holder of floating charge over the company's assets. It cannot be done if the company has already been subject to a CVA in the past 12 months or is subject to insolvency proceedings.

Alternatively, a creditor can apply to the court for an appointment.

The holder of a floating charge is allowed 5 days notice of any appointment, to give him the opportunity to appoint an administrator of his choice if he prefers.

Once appointed, the administrator (who must be a licensed insolvency practitioner) has lots of powers, including 14 days to decide whether to retain employees and the ability to appoint or remove directors. He must report to creditors within eight weeks. The directors must give him a statement of the company's affairs within 21 days, see also FAQs: directors and insolvency.

Once in administration, a company is protected from insolvency proceedings from its creditors.

In order to rescue the company, an administrator may consider a Pre-pack. This will allow for the disposal of the business and then the company will be dissolved, or placed into liquidation.

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