Last Updated: 18/08/2026
What is administration?
Administration is a formal insolvency process in which an insolvent company is placed under the control of a licensed insolvency practitioner, known as the administrator. A statutory moratorium then pauses most creditor action, protecting the business while the administrator works towards rescuing it or, where rescue is not possible, a better outcome for creditors than an immediate closure. It applies to limited companies and partnerships, but not to sole traders.
In short, administration is a quick legal process that protects your limited company or partnership, put in place by a filing at Court or by a Court order. Once the process has started, no legal action can be taken against the business, and no assets can be removed, without the approval of the Court or of the insolvency practitioner appointed as administrator to oversee the company.
This page was reviewed by Jo Watts, a licensed insolvency practitioner regulated by the ICAEW.
Administration must meet one of three statutory objectives:
- Rescuing the company as a going concern, where the business is held in short-term protection until it can be handed back to the directors.
- Achieving a better result for creditors than winding the company up, that is, a better return than going straight into liquidation.
- Realising assets to repay preferential and/or secured creditors.
What does going into administration mean for a business?
Going into administration means the company comes under the control of the licensed insolvency practitioner appointed as administrator, and a statutory moratorium stops creditors taking action against it. The administrator runs the business while the best available outcome is worked out, which is usually decided within the first eight weeks. The aim is to protect the company and its value while options such as rescue, a sale or an orderly wind-down are assessed.
Once the company has entered administration, no creditor can take action against it without the permission of the Court or the administrator. That protection is broad, covering suppliers, retention of title creditors, finance companies, HMRC, business rates claimants, employees, banks, directors and shareholders. Administration is fast and takes effect without first notifying creditors or shareholders.
With the business protected, it is for the administrator, usually with the directors’ help and input, to decide what happens next. This may involve one or more of the following:
- Reduce the staff headcount and close any unprofitable branches or divisions.
- Keep trading to finish incomplete work and maximise value.
- Try to sell all or part of the business to a new owner.
- Sell assets and stock to realise funds for creditors.
Sometimes a sale of the business and assets is arranged before the administrator is appointed and completed straight afterwards. This is known as pre-pack administration, which can preserve value where a planned sale protects the business better than a longer process.
Within eight weeks of going into administration
Within eight weeks, the administrator writes to all creditors with their proposals in a written report. A creditors’ decision procedure may be called within two weeks of that report to vote on the outcome, and the administrator must call one if creditors holding more than 10% of the debt by value ask for it. The outcome may be to carry on realising assets, move into liquidation or a company voluntary arrangement, move to dissolution, or return the company to the directors if it can be made solvent again. An administration ordinarily ends one year after it takes effect, though it can be extended with the consent of creditors or by the Court.
What is the difference between administration and liquidation?
The difference between administration and liquidation is one of purpose. Administration aims to rescue the company or, failing that, to achieve a better result for creditors than an immediate winding up, with a statutory moratorium giving the business breathing space. Liquidation closes the company down: its assets are realised, creditors are paid in the order set by law, and the company is then dissolved and removed from the register.
In administration the company can keep trading under the administrator while a solution is found, and the process is time-limited. Liquidation is an ending rather than a rescue, suited to a business that is no longer viable, and administration often leads into liquidation or dissolution once the administrator has done what they can.
Before agreeing to act, an administrator must be satisfied a statutory objective can be met. If you are weighing the options, it helps to be clear on what insolvency means for a company and on the alternatives we cover across our company administration services.
Who runs a company in administration, and what happens to the directors?
A company in administration is run by the administrator, who must be a licensed insolvency practitioner and is sometimes called the company administrator. The directors remain in office, but they lose day-to-day control of the business, as management decisions pass to the administrator. The directors are expected to cooperate, hand over the company’s books and records, and provide the information the administrator needs.
An administrator can be appointed in more than one way. The application to appoint an administrator can be made by:
- The directors.
- The company itself.
- A creditor or group of creditors.
- The shareholders.
- A bank or lender holding a floating charge, also known as a debenture.
Most appointments are made by the directors, or by a qualifying floating charge holder, filing documents at Court, which is part of why administration takes effect so quickly. Alternatively a creditor or shareholder can apply to the Court for an administration order. Whichever route is used, the administrator must act in the interests of the creditors as a whole, and part of their role is to review the directors’ conduct in the period before the appointment.
What happens to employees in administration?
When a company goes into administration, employees are not automatically dismissed. If the administrator continues to trade the business, staff usually keep their jobs in the short term, and where the business or part of it is sold as a going concern, employees transfer to the buyer under the TUPE regulations.
Speak to a licensed insolvency practitioner
This page is general information, not advice on your company’s specific position. Whether administration is the right option depends on your situation, your creditors and what you are trying to protect. We are licensed insolvency practitioners regulated by the ICAEW, so the right next step starts with a conversation about the facts of your case. To understand what administration or another route could mean for your company, call us on 0800 331 7417 or book free initial advice.
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