Administration is a court supervised rescue procedure in which a licensed insolvency practitioner takes control of a company as administrator. A statutory moratorium stops creditors from enforcing their claims while the administrator works through a fixed order of objectives set by paragraph 3 of Schedule B1 to the Insolvency Act 1986: rescue the company, failing that get creditors a better result than liquidation, and failing that realise property for secured or preferential creditors.

What is administration for?

Paragraph 3(1) of Schedule B1 sets three objectives in strict order:

  1. rescuing the company as a going concern;
  2. achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up without first being in administration;
  3. realising property to make a distribution to one or more secured or preferential creditors.

The administrator must pursue the first objective unless they think it is not reasonably practicable, or that the second would produce a better result for creditors as a whole. They may fall back to the third only if neither of the first two is reasonably practicable, and only if they do not unnecessarily harm the interests of creditors as a whole. Throughout, paragraph 3(2) requires them to act in the interests of the creditors as a whole, and paragraph 4 requires them to act as quickly and efficiently as is reasonably practicable.

The administrator is an officer of the court whether or not the court appointed them (paragraph 5) and must be qualified to act as an insolvency practitioner in relation to the company (paragraph 6).

Who can put a company into administration?

There are three routes.

  • Court order. The company, its directors or one or more creditors (including contingent and prospective creditors) can apply under paragraph 12. The court can make an order only if satisfied that the company is or is likely to become unable to pay its debts and that the order is reasonably likely to achieve the purpose of administration (paragraph 11).
  • Qualifying floating charge holder. A lender whose security covers the whole or substantially the whole of the company’s property and includes a qualifying floating charge can appoint out of court under paragraph 14.
  • The company or its directors. Paragraph 22 allows an out of court appointment. The directors must give at least five business days’ written notice of intention to appoint to any qualifying floating charge holder (paragraph 26), who can step in and appoint its own choice. The appointment must then be made within ten business days of filing the notice of intention with the court (paragraph 28(2)).

The out of court route for directors is blocked if a winding up petition has been presented and not disposed of (paragraph 25(a)), unless the notice of intention was filed first, and for 12 months after a previous administration that began on a company or directors’ appointment (paragraph 23). The administrator must also state that, in their opinion, the purpose of administration is reasonably likely to be achieved (paragraph 29(3)).

How does the moratorium protect the company?

Paragraph 42 prevents any resolution or order to wind the company up while it is in administration, apart from public interest and regulator petitions. Paragraph 43 then stops, without the administrator’s consent or the court’s permission:

  • any step to enforce security over the company’s property;
  • repossession of goods held under hire purchase agreements;
  • a landlord forfeiting a lease by peaceable re entry;
  • any legal process, including proceedings, execution and distress.

An interim moratorium applies from the moment a notice of intention to appoint is filed with the court or an administration application is made (paragraph 44), which is why directors under creditor pressure often file a notice of intention as a first step. If the company had a pending winding up petition, it is dismissed when an administration order is made, or suspended after an appointment by a floating charge holder (paragraph 40).

What happens to the directors?

The administrator may do anything necessary or expedient for the management of the company’s affairs, business and property (paragraph 59). The directors stay in office, but under paragraph 64 neither the company nor its officers may exercise any management power that could interfere with the administrator’s powers without the administrator’s consent. In practice the directors stop running the business and become a source of information for the administrator. Section 7A of the Company Directors Disqualification Act 1986 also requires the administrator to send the Secretary of State a conduct report on everyone who was a director at any time in the three years before the administration, normally within three months. See director disqualification for where that can lead.

How does the administrator decide the company’s fate?

The Insolvency Service’s director information hub describes the realistic outcomes as negotiating a company voluntary arrangement, selling all or part of the business as a going concern, or selling the assets and then closing the company. The formal decision is made through the administrator’s proposals.

Under paragraph 49, the administrator must send a statement of proposals to the registrar of companies, every creditor and every member as soon as reasonably practicable and in any event within eight weeks of the company entering administration. Where the administrator does not think rescue or a better result than liquidation can be achieved, the statement must explain why. The proposals can include a company voluntary arrangement or a restructuring plan.

Paragraph 51 requires the administrator to seek the creditors’ approval, with an initial decision date within ten weeks of the start of the administration. Creditors may approve the proposals as they stand or with modifications the administrator accepts (paragraph 53). No decision is needed under paragraph 52 if the administrator states that creditors will be paid in full, that unsecured creditors will receive nothing beyond the prescribed part, or that neither of the first two objectives can be achieved, although creditors holding at least 10% of the company’s debts can still require one.

Where the business is sold before proposals go out, often on the first day, that is a pre pack administration and extra rules apply to sales to connected people.

How are creditors paid in administration?

Paragraph 65 allows the administrator to make distributions to creditors, applying the same priority rules as a liquidation. Payments to unsecured creditors who are neither secured nor preferential need the court’s permission unless they come from the prescribed part set aside from floating charge realisations. The administrator can also deal with property covered by a floating charge as if it were not charged (paragraph 70), with the charge holder keeping its priority over the proceeds.

How long does administration last and how does it end?

An administrator’s appointment ends automatically after one year (paragraph 76), as the director information hub also notes. It can be extended by the court for a specified period, or once by creditor consent for up to a further year. Consent means each secured creditor and, if there are unsecured debts, the unsecured creditors (paragraph 78).

The main exits are:

  • Creditors’ voluntary liquidation under paragraph 83, where secured creditors have been paid or provided for and unsecured creditors will receive a distribution beyond the prescribed part. See creditors’ voluntary liquidation.
  • Dissolution under paragraph 84, where the administrator thinks there is no property left that could allow a distribution.
  • Return to the directors after a successful rescue, often through a CVA or restructuring plan.
  • Compulsory liquidation where the court orders it.

What does this look like in practice?

Illustration only. A manufacturer owes £2 million, including £800,000 to a bank with a qualifying floating charge. The directors file a notice of intention to appoint, which triggers the interim moratorium and stops a landlord forfeiting the factory lease. The bank consents and the administrator is appointed a week later. Rescuing the company itself is not practicable because its debts are too large, but trading for six weeks and selling the business as a going concern should produce more for creditors than a liquidation would. The administrator sells, sends proposals within the eight week limit, pays the bank, and then moves the company into creditors’ voluntary liquidation to distribute the rest.

What mistakes do directors make?

  • Assuming administration saves the company. It may save the business while the company itself ends in liquidation or dissolution.
  • Continuing to commit the company after appointment. Management powers need the administrator’s consent.
  • Letting a creditor present a winding up petition first, which closes the directors’ out of court route.
  • Filing a notice of intention without being ready to appoint within ten business days.
  • Delaying advice until the company is beyond rescue. Administration is one of several options the Insolvency Service lists for a company that can still continue, alongside informal agreements, CVAs, restructuring plans and a moratorium. Check the insolvency tests early.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.