What is Company Administration?
Company administration is a formal insolvency process for a limited company that cannot pay its debts. A licensed insolvency practitioner is appointed as administrator and takes control of the company. Their job is to rescue the company or, failing that, to sell the business for more than closing it down would raise.
Administration can save your business if it’s worth more to a buyer while still trading than broken up and sold off. While the administrator works, a legal freeze called a moratorium stops creditors suing the company or asking the court to close it.
The company’s debts don’t become yours just because it goes into administration. The exceptions are debts you’ve personally guaranteed and claims for misconduct, such as trading on when insolvency couldn’t be avoided.
Handing control of a company you’ve run to an outsider is a hard step to take. The administrator works for the creditors as a whole, not for you. Once they’re appointed, you can’t reverse that decision on your own.
Be wary of anyone who sells administration as an easy way to keep the business and shed its debts. Buying it back yourself is allowed, but in the first eight weeks the sale needs an independent evaluator’s report or your creditors’ approval. That check exists because a cheap sale to an insider leaves creditors short.
When you come to us about administration, we start with two questions. Does a lender hold security over everything the company owns? And has any creditor already asked the court to close the company down? Together they tell us whether a lender gets a say in choosing the administrator, and whether you can still avoid a court hearing.
Key Takeaways
- Administration puts a licensed insolvency practitioner in charge of your company as administrator. There’s no standard fee: the administrator’s fee is set for each case and paid from the company’s assets ahead of most creditors.
- Once the administrator is appointed, a legal freeze called a moratorium protects the company from a winding-up order. Creditors can’t enforce debts, sue or repossess premises unless the administrator or the court agrees.
- Within 8 weeks of the appointment, the administrator must send a Statement of Proposals, their plan, to creditors, Companies House and the company’s shareholders. It says whether the plan is to rescue the company, sell the business or close it.
- You stay a director but can’t use your management powers without the administrator’s consent. You have to hand over the company’s records. Within 11 days of being asked, you must also prepare a statement of affairs, a formal statement of the company’s assets and debts.
- Administration doesn’t touch what you owe personally. A lender can still enforce a personal guarantee you signed for a loan, lease or supplier account. The administrator can also collect an overdrawn director’s loan account from you.
What Is Company Administration?
Company administration exists to achieve one of three purposes. Paragraph 3 of Schedule B1 to the Insolvency Act 1986 sets them out in order of priority. The administrator must aim to:
- rescue the company as a going concern, meaning still open and trading;
- achieve a better result for creditors than immediate liquidation; or
- sell assets to pay secured creditors, such as a lender holding a charge, or preferential creditors, such as staff owed wages.
That order matters to you, because the administrator has to try to save the company itself first. They can move to the second purpose only if rescue isn’t reasonably practicable, or if it would give creditors as a whole a better result.
They move to the third only if neither of the first two is achievable. If they move down the list, their proposals to creditors have to explain why.
A sale of the business while it’s still trading is one way to reach the second purpose. A buyer takes the trading business, or the parts worth having, and the jobs, contracts and customers can go with it. The old company keeps the sale money and its debts. It then moves into liquidation, or is dissolved, which means it’s removed from the Companies House register.
I’d want to know early whether a buyer would pay more for the business while it’s trading than for its equipment and stock sold off. If the honest answer is no, the extra cost of administration is hard to justify.
On the day the appointment takes effect, each group with a stake in the company is affected in a different way, though no debt disappears:
| Who | What changes when administration starts |
|---|---|
| Directors | Stay in office, but need the administrator’s consent to use any management power. |
| Creditors | Need the administrator’s consent or the court’s permission to enforce or sue. Their debts still stand. |
| Employees | Keep working unless the administrator makes cuts. Jobs can also move to a buyer. |
| Customers | Orders can still be met if trading continues. Money paid for goods not yet delivered is normally an unsecured claim. |
| Shareholders | Lose any say in running the company and are paid last, if at all. |
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Who Can Appoint a Company Administrator?
A company administrator can be appointed by the directors or the company, by a lender holding a qualifying floating charge, or by the court. Whoever makes the appointment normally chooses the administrator. So if you want a say in who runs your company, you need to act before the lender does.
A floating charge is security over assets that keep changing, such as stock, cash and unpaid invoices. A debenture is the document that grants it. The charge qualifies when it covers all or nearly all of the company’s property and gives the lender the power to appoint.
An all-assets debenture held by a bank or other lender normally does both. Where a lender holds one, one of the first things I look at is whether it’s likely to back your choice of administrator.
| Appointer | How it works | When it’s used |
|---|---|---|
| Directors | If there’s a qualifying floating charge holder, give them notice of intention to appoint and file it at court. Then file the notice of appointment. No court hearing is needed. | The quickest route when you decide rescue or a sale is the right call. It isn’t available once a winding-up petition, a creditor’s court application to close the company, has been presented. |
| Qualifying floating charge holder | The lender (typically a bank with an all-assets debenture) appoints directly out of court. | Used when the lender wants its own choice of administrator, for example where it has lost confidence in the directors. |
| The court | Any creditor, the company or the directors apply for an administration order. A court hearing is required. | Used when the out-of-court routes aren’t available, for example once a winding-up petition has been presented. It’s also used where a dispute about the appointment needs resolving. |
The directors’ route gives the lender a say. You must give a qualifying floating charge holder five business days’ written notice first. In that window the lender can agree to the appointment or appoint an administrator of its own choosing.
Filing the notice of intention at court also starts an interim moratorium. It protects the company until the appointment is made, or for up to 10 business days if it isn’t.
Let the proposed administrator check every document before anything is filed. A defective Notice of Intention can make the appointment invalid and force the court hearing you were trying to avoid.
How Does Company Administration Work?
Appointment and the Moratorium
The appointment takes effect when the notice of appointment is filed at court. On the court route, it takes effect when the court makes its order. From that moment the moratorium freezes creditor action against the company.
No creditor can enforce a debt, start or continue legal proceedings, or repossess the company’s premises unless the administrator or the court allows it.
The administrator then tells Companies House, on form AM01, and the company’s creditors. A notice also goes in The Gazette, the official public record of insolvency notices.
Every invoice, order form, business letter and the company website must name the administrator and say that they manage the company. That means your customers and suppliers will see it from the first day.
Expect the administrator to ask you, and any other director, for a statement of affairs. That’s a formal list of what the company owns, what it owes and to whom. You have 11 days from the request, which the administrator can extend.
Failing to deliver the statement without a reasonable excuse is a criminal offence. I’d tell any director to start the creditor list before the appointment if they can. It’s far easier to build from the company’s own ledgers while you still run them.
Suppliers with unpaid invoices become unsecured creditors, owed money without any security. They can’t sue for those debts while the moratorium lasts.
Since June 2020, most suppliers can’t end a contract to supply the company just because it has entered administration. Anything new the administrator orders is paid as an expense of the administration, ahead of the old debts.
Statement of Proposals
The Statement of Proposals is the administrator’s plan. It must go to creditors, Companies House and the company’s members within 8 weeks of the appointment. It says how the administrator intends to achieve the purpose. Where rescue or a better result than liquidation is out of reach, it explains why.
Creditors can approve the proposals, approve them with changes the administrator agrees to, or reject them. The decision doesn’t need a physical meeting. It can be taken by deemed consent, which means the proposals count as approved unless creditors owed at least 10% of the debt object.
In some cases no creditor decision is sought at all. One is where unsecured creditors will get nothing beyond a small share set aside by law. Creditors owed 10% of the debts can still ask for one.
Execution: Sale, Restructure, or Wind-Down
Once the proposals are approved, the administrator carries them out, and the work depends on the purpose. A rescue means restructuring the company and dealing with its creditors. A sale means marketing the business while it keeps trading. A wind-down means selling the assets and preparing for liquidation or dissolution.
Where there’s a sale, it’s best done early, because a business loses customers, staff and suppliers the longer it trades under an administrator. The time after the sale goes on agreeing creditors’ claims and paying out what was raised.
When the sale is agreed before the administrator is appointed and completes straight afterwards, it’s called a pre-pack. The administrator must then explain the deal to creditors in a report. Statement of Insolvency Practice 16, the profession’s standard for pre-packs, sets out what that report must contain.
A sale to you, another director or anyone else connected to the company carries an extra condition. Since 30 April 2021, it applies to a sale of all or a substantial part of the business or assets in the first eight weeks.
Such a sale needs either the creditors’ approval or a written opinion from an independent evaluator. If you hope to buy the business back, I’d build that report into your timetable from the very start. Without it, the sale needs your creditors’ approval instead.
Exit From Administration
Administration ends when its purpose is achieved or its time runs out. The company may be rescued and handed back to its directors. It may carry on under an approved company voluntary arrangement (CVA), a formal repayment deal with its creditors.
Otherwise it may move to creditors’ voluntary liquidation to pay out the sale money. Or it may be dissolved because nothing is left to distribute.
How Much Does Company Administration Cost and How Long Does It Take?
Company administration has no standard price, and no official source publishes typical fees. The administrator’s fee is set for each case, and the creditors or their committee normally fix the basis.
The basis can be a set amount, a percentage of the property the administrator deals with, or the time spent. It can also be a mix of these. If any part of the fee is charged by time, the administrator must give creditors a fees estimate before the basis is fixed.
Before you agree to an appointment, I’d ask the proposed administrator for the fee basis and the likely total in writing.
Trading on is what usually makes administration dearer than liquidation. It means paying staff, keeping premises open and marketing a sale. Those costs and the fees come out of the company’s assets as an expense of the administration.
They rank behind lenders with a fixed charge, meaning security over a named asset such as property. They’re paid ahead of almost everyone else. So every pound spent on the administration reduces what creditors receive.
An adviser who recommends administration should be able to explain why a cheaper creditors’ voluntary liquidation (CVL) wouldn’t do. In a CVL, you close the insolvent company through a licensed insolvency practitioner.
Before we recommend administration, we set its likely cost against a CVL, because it only pays for itself when a sale or rescue recovers more.
| Item | Figure | Notes |
|---|---|---|
| Administrator’s fee | Set for each case | Normally fixed by the creditors as a set amount, a percentage of the property, time spent, or a mix. A time-based fee needs an estimate first. |
| Legal fees and other costs | On top of the fee | Court fees, valuations and sale documents, paid from the company’s assets. |
| Automatic end | 12 months | Extendable once by creditor consent (up to 12 months) or for longer by court order. |
| Time to Statement of Proposals | Within 8 weeks of appointment | Statutory deadline. |
Whatever the administrator raises is paid out in an order set by law. That’s why shareholders and ordinary suppliers come near the end:
- Lenders with a fixed charge, from the assets that charge covers, such as a mortgaged building.
- The costs of the administration, including the administrator’s fees and the wages of staff kept on.
- Preferential creditors. Employees’ unpaid wages and holiday pay come first, up to legal limits. Then comes HMRC for VAT, PAYE income tax, employees’ National Insurance and other tax taken from pay. HMRC has held that priority since 1 December 2020.
- The prescribed part, a share of the floating charge money set aside for unsecured creditors. It’s capped at £800,000 where the floating charge was created on or after 6 April 2020, and at £600,000 for older charges.
- The lender with the floating charge.
- Unsecured creditors, such as suppliers, landlords and HMRC for corporation tax.
- Shareholders, who are paid only if everyone above is paid in full.
What Happens to Directors During Company Administration
Company administration takes the running of the company away from you as a director. Your name stays on the register, but every management decision now needs the administrator’s agreement.
From then on, your main job is to give the administrator what they ask for. That means information, records and honest answers about the company’s history.
The administrator may ask you to keep working for a while. That’s most likely where your technical knowledge or customer relationships keep the business worth buying while it’s marketed. Whether you stay, and on what terms, is for the administrator to decide.
Within three months of the appointment, the administrator must report to the Insolvency Service on everyone who was a director in the previous three years. The Insolvency Service uses that report to decide whether to seek a director disqualification of up to 15 years.
The law requires that report in every administration, so being named in it isn’t a finding against you. Records handed over late, or not at all, do go into it, however.
The administrator also looks at how you ran the company before the appointment. Did you keep trading after you knew, or should have known, that insolvency couldn’t be avoided? Did you pay one creditor ahead of the others shortly before? And did you keep proper records?
Your personal guarantees sit outside the administration altogether. If the company defaults on a loan or lease you backed with a personal guarantee, the lender or landlord can come to you for it. An overdrawn director’s loan account is money you owe the company, and the administrator can collect it.
If the administration moves into liquidation, the liquidator can carry on looking into how the company was run. That includes anything the administrator has already raised, and it’s covered in what happens to directors in liquidation.
What Happens to Employees During Company Administration
Company administration doesn’t make employees redundant automatically. The administrator decides whether to keep trading and which staff to keep.
Staff kept on beyond 14 days are “adopted” under paragraph 99 of Schedule B1. Their wages for work done after that are paid ahead of the administrator’s own fees.
Staff who are made redundant can claim from the National Insurance Fund, which works the same way as what happens to employees in liquidation. Those claims go to the Redundancy Payments Service.
It pays up to 8 weeks of unpaid wages, up to 6 weeks of holiday pay and statutory notice pay of up to 12 weeks. Staff with two years’ service also get statutory redundancy pay. Each week’s pay counts only up to £751 for redundancies from 6 April 2026, or £719 before that date.
If the business is sold as a going concern, the Transfer of Undertakings (Protection of Employment) Regulations 2006 may apply. They move the employees to the buyer on their existing terms.
Company Administration vs Other Insolvency Routes
| Route | Best used when | Main trade-off | Related guide |
|---|---|---|---|
| Administration | The business has value worth rescuing, or a moratorium is needed urgently. | You lose control, and the fees come out of what creditors would otherwise receive. | This page |
| Company Voluntary Arrangement (CVA) | The business is viable, and the problem is restructuring debt across many creditors. | No moratorium of its own, so a creditor can still petition while the deal is put together. | Company voluntary arrangement |
| Creditors’ Voluntary Liquidation (CVL) | Rescue isn’t realistic, and the right call is to close cleanly. | Closes the company, but costs less than administration. | Creditors’ voluntary liquidation |
| Compulsory liquidation | A creditor has already petitioned the court. | You lose control, and the Official Receiver, a civil servant at the Insolvency Service, takes charge at first. | Compulsory liquidation |
| Informal creditor negotiation | A few creditors, all open to instalments, and no enforcement pressure. | No legal protection, so one creditor breaking ranks ends it. | Dealing with creditor pressure |
| Administrative receivership | Only open to a lender whose floating charge was created before 15 September 2003. | The receiver acts for that lender, not for creditors as a whole. | Administration vs administrative receivership |
When Company Administration Is the Right Route
Company administration is usually the right route when three things are true at once:
- The business has value that an immediate liquidation would destroy. A trading business with customer contracts, a known name or specialist staff is the kind a buyer will pay for while it’s still running.
- Creditor pressure is too intense for an informal deal or a CVA to hold. The moratorium stops the court making a winding-up order. Once a petition has been presented, though, you can’t appoint out of court and must apply to the court instead.
- The expected outcome justifies the cost. The fees and the cost of trading on only make sense where a rescue or sale recovers more than a cheaper CVL would.
If you’re not sure where the company stands, take our short insolvency test before you commit to a route.
What Directors Should Do Next About Company Administration
- If a creditor has threatened a winding-up petition, speak to a licensed insolvency practitioner straight away. You can only appoint an administrator out of court until a petition is presented.
- Pull together the records the administrator will need: management accounts, board minutes, payroll, HMRC letters and the customer ledger. Include the paperwork for any Bounce Back Loan or other government-backed loan.
- Work out what makes the business worth rescuing or buying. Without a clear answer, administration is unlikely to be the right route.
- If administration isn’t the right route, the same conversation should tell you whether a CVA, a CVL or another procedure fits better.
Frequently Asked Questions About Company Administration
How much does company administration cost?
Nobody publishes a standard price, because each administrator’s fee is agreed for that case. It comes out of the company’s assets before most creditors are paid. Lenders with a fixed charge, and some debts the administrator takes on, rank ahead of it. Legal fees, valuations and other costs are added on top.
Keeping the business trading, selling property and dealing with a long list of creditors all add work, and so add to the bill. Before you sign anything, ask how the fee will be charged and roughly what it will come to.
Can the company survive administration?
Yes. Paragraph 3 of Schedule B1 puts saving the company itself at the top of the administrator’s list. Where the administrator can restructure its affairs and return it to solvency, the company comes out of administration intact.
Where that isn’t reasonably practicable, the law points the administrator to the next purpose: a better result for creditors than liquidation. Selling the business as a going concern can achieve it. The jobs, contracts and customers then move to the buyer while the old company is wound up.
How long does company administration last?
Administration ends automatically a year after the appointment. The creditors can agree one extension of up to a year, and the court can grant longer.
It can also end sooner. Once the purpose is achieved, the administrator can bring it to a close. For example, the company can move to liquidation or dissolution once the sale money is paid out.
Do employees lose their jobs in administration?
Not necessarily. Staff keep working unless the administrator decides to cut jobs. Once an employee has been kept on for more than 14 days, pay for their later work ranks above the administrator’s own fees.
If the business is sold as a going concern, the transfer of employment rules can move staff to the buyer on their existing terms. Anyone made redundant can claim unpaid wages, notice pay and redundancy pay from the Redundancy Payments Service.
What is the difference between administration and liquidation?
Administration tries to rescue the company or get creditors a better return than an immediate liquidation would. Liquidation closes the company and shares out whatever its assets raise.
Both take control away from you. Administration usually costs more and takes longer because the business often keeps trading. Liquidation is quicker and cheaper, but it ends the trading business. The right choice depends on whether the business is worth more kept going than broken up.
Can directors be personally liable after administration?
Yes. The administrator examines how the directors behaved, just as a liquidator does. That covers wrongful trading under section 246ZB of the Insolvency Act 1986 and preference payments under section 239. It also covers transactions at undervalue under section 238 and breaches of directors’ duties.
Personal liability doesn’t depend on which procedure the company enters. It depends on what you did in the run-up to the insolvency. Above all, it depends on what you did once you knew, or should have known, that it couldn’t be avoided.
Who controls the administrator’s fees?
Administrator fees are governed by Part 18 of the Insolvency (England and Wales) Rules 2016. Statement of Insolvency Practice 9, the profession’s standard on fees, applies too.
Where the administrator charges by time spent, they must give creditors a fees estimate before the fee basis is approved. It sets out the work, the basis of charging and the expected cost. Once approved, that estimate acts as a cap. The fees can only go higher with the approval of the creditors, their committee or the court.
If the fees look excessive, a secured creditor can ask the court to review them under rule 18.34 of the 2016 Rules. So can an unsecured creditor backed by at least 10% in value of the unsecured creditors, or with the court’s permission. The application must be made within eight weeks of the progress report that first shows the fees.
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Related Guides
- Company Liquidation: when administration isn’t the right route and closing the company is the answer.
- Company Voluntary Arrangement: the lighter rescue route, where the business is viable but the debt is the problem.
- Compulsory Liquidation: what happens if a creditor petitions before administration can be put in place.
- Winding-Up Petitions: how to respond to a creditor’s petition, or defend it.
- What Happens to Directors in Liquidation: how a liquidator reviews the way you ran the company.
- What Happens to Employees in Liquidation: redundancy rights and the National Insurance Fund.
- Insolvency Test: a 30-second check of where your company stands before you choose a route.
