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An Overview of Company Administration: What You Need to Know

When a company faces financial distress, liquidation may seem like the only option. However, if the company is deemed to be viable despite its difficulties, administration can be a powerful process to save the business through financial and operational restructuring.

Licensed insolvency practitioners are appointed in formal insolvency processes such as administration. The appointed practitioner takes control of the company while a way forward is determined. Administration is not suitable for every company, but when appropriate, it can protect employees, mitigate creditor losses, and save the company.

For a company to qualify for administration, it must satisfy one of the following statutory aims:

  1. To save the company as a going concern
  2. To provide better results for creditors than liquidation
  3. To realise assets for the benefit of secured or preferential creditors in case rescuing the company is not possible.

The company is given a moratorium, a legal ringfence that prevents creditors from commencing any litigation action. This provides the necessary breathing space for the administrator to assess the situation and develop a plan to meet the administration’s aims.

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