Chris is an Insolvency Practitioner regulated by the ICAEW since 2014,.
He is experienced in contentious insolvency with excellent analytical skills and strong knowledge of both general and technical insolvency matters.
Company administration is the most powerful rescue tool in UK insolvency law. It places the company under court protection, stops all creditor enforcement, and appoints a licensed insolvency practitioner to decide whether the business can be saved, sold, or must be wound up.
The moment the administrator is appointed, an automatic moratorium freezes every creditor action against the company: no winding-up petitions, no bailiffs, no legal proceedings without the court’s permission. That breathing space is what makes administration different from every other insolvency process. But it comes at a price: you lose control. The administrator runs the company, not you. We work with directors entering administration regularly, and we see them expecting to steer the process. In reality, you cooperate with the administrator and answer their questions. The decisions are theirs.
Administration is a formal insolvency process under Part II and Schedule B1 of the Insolvency Act 1986. An administrator (a licensed IP) is appointed to achieve one of three statutory purposes: (1) rescue the company as a going concern, (2) achieve a better result for creditors than immediate liquidation, or (3) realise assets to distribute to secured or preferential creditors. In practice, most administrations result in a sale of the business or a transition to liquidation. Pure rescue — where the company emerges independently — is less common than directors hope, but it does happen when the business has genuine underlying value.
How Company Administration Works: Step by Step
Step 1: Appointment. The administrator can be appointed by the company’s directors, by a qualifying floating charge holder, or by the court. The most common route is director appointment, where you file a notice of intention to appoint at court, which itself creates an interim moratorium for up to 10 business days. We always advise directors to work with the proposed administrator before filing to ensure the paperwork is correct and the appointment is valid.
Step 2: Moratorium takes effect. From the moment the administrator is appointed, no creditor can enforce a debt, commence or continue legal proceedings, or exercise a right of forfeiture against the company without the administrator’s consent or the court’s permission. This is the most valuable feature of administration and the reason it exists.
Step 3: Statement of proposals. Within 8 weeks of appointment, the administrator must send creditors a statement of proposals explaining what they intend to do with the company and how they plan to achieve the statutory purpose. Creditors can approve, reject, or modify the proposals at a creditors’ meeting or through a decision procedure.
Step 4: Execution. The administrator carries out the proposals: restructuring the business, negotiating with creditors, selling assets or the business as a going concern, or preparing for a transition to liquidation. During this period, the administrator manages the company and makes all commercial decisions.
Step 5: Exit. Administration ends in one of several ways: the company is rescued and returned to the directors’ control, a Company Voluntary Arrangement (CVA) is proposed, the business is sold and the company moves to liquidation to distribute the proceeds, or the company is dissolved if there are no assets to distribute.
Who Can Appoint an Administrator?
Directors. The most common route. You file a notice of intention to appoint (Form ADM1) at court, which creates an interim moratorium. The appointment is then made by filing Form ADM2. No court hearing is required for a director appointment, which makes it the fastest route to administration.
A qualifying floating charge holder. A lender who holds a qualifying floating charge (typically a bank with an all-assets debenture) can appoint an administrator directly. This route is used when the bank wants to protect its position, often over the directors’ objections. We see this in cases where the bank has lost confidence in the directors and wants its own choice of administrator.
The court. Any creditor, the company itself, or the directors can apply to the court for an administration order. This route is used when the other routes are not available or when a court hearing is needed to resolve a dispute about the appointment.
Company Administration Costs: What to Expect
Administration is the most expensive formal insolvency process. Administrator fees typically start at £15,000 and can run to £50,000 or more for complex cases with multiple stakeholders, property to sell, or ongoing trading during administration.
The fees are paid from the company’s assets as an expense of the administration, ranking ahead of all creditor claims except fixed charges. This means the cost of administration reduces the amount available to creditors. We tell directors: administration is only worth the cost if it achieves a meaningfully better outcome than immediate liquidation. If the company has limited assets and no realistic prospect of rescue or sale, the administrator’s fees may consume most of what is available.
Administration Timeline: How Long Does It Take?
Administration has a statutory maximum of 12 months, which can be extended by consent of creditors (for up to 6 months) or by court order. In practice, we find most administrations resolve within 6-12 months.
The typical timeline runs: appointment (day 1), statement of proposals to creditors (within 8 weeks), execution of proposals (months 2-10), and exit route (month 8-12). If the administrator is selling the business, the sale often completes within the first few months. The remaining time is spent settling the administration’s affairs and distributing any proceeds.
What Happens to Directors During Company Administration
Your executive authority is suspended. The administrator controls the company’s affairs, and you cannot exercise any management powers without the administrator’s consent. You remain a director in name, but your practical role is to cooperate with the administrator: provide information, attend meetings, and answer questions about the company’s history and affairs.
The administrator may ask you to continue working in a limited capacity to assist with the transition, particularly if you have technical knowledge or customer relationships that are essential to preserving the business’s value. But this is at the administrator’s discretion, not yours.
Your personal exposure as a director is assessed in the same way as in any other insolvency process. The administrator will examine your conduct, including whether you traded when you should have stopped, whether you made preferential payments, and whether you maintained adequate records. If the administration transitions to liquidation, the liquidator picks up where the administrator left off.
What Happens to Employees During Company Administration
Employees are not automatically made redundant when the company enters administration. The administrator decides whether to continue trading and retain staff. If employees are retained, they are “adopted” by the administrator after 14 days, which means their wages and certain other employment costs rank as an expense of the administration (ahead of the administrator’s own fees).
If the administrator decides to make redundancies, employees can claim from the National Insurance Fund in the same way as in liquidation. If the business is sold as a going concern, TUPE (Transfer of Undertakings) may apply, transferring employees to the buyer on their existing terms.
Company Administration vs Other Insolvency Routes
We find directors often ask how administration compares to the alternatives:
Administration vs CVA: Administration provides immediate moratorium protection but costs more and removes director control. A CVA is cheaper and preserves director control but has no automatic moratorium.
Administration vs CVL: Administration attempts rescue; a CVL closes the company. If rescue is realistic, administration first. If not, go straight to CVL and save the administration fees.
Administration vs informal negotiation: Informal negotiation has no statutory protection. If a creditor breaks ranks and petitions, you have no defence. Administration provides the statutory backstop.
Next Steps: Is Company Administration Right for Your Business?
Administration is the right route when the business has genuine value that would be destroyed by immediate liquidation, when creditor pressure is too intense for informal negotiation or a CVA, and when the cost of the process is justified by the expected outcome. If the company has limited assets, no realistic rescue prospect, and creditor pressure that can be managed through a CVL, administration may be an expensive detour.
Company Debt connects directors with licensed insolvency practitioners who handle administration cases regularly. A free, confidential consultation will tell you whether administration is viable for your company or whether a different route makes more sense.
How We Wrote This Article
This article was written by the Company Debt editorial team based on the Insolvency Act 1986 (Part II and Schedule B1, administration), the Insolvency (England and Wales) Rules 2016, and practical experience from administration cases handled by licensed insolvency practitioners in our network. The article was reviewed by Chris Andersen, a licensed insolvency practitioner regulated by the IPA.
Company Debt is a commercial service that connects business owners with insolvency professionals. We may receive a fee when you engage a practitioner through our service. This does not influence our editorial content or recommendations.
FAQs About Company Administration
How much does company administration cost?
Administrator fees typically start at £15,000 and can exceed £50,000 for complex cases. Fees are paid from the company’s assets as an expense of the administration. Legal fees, valuation costs, and other disbursements are additional. The total cost depends on the complexity of the case, the number of creditors, and whether the company continues to trade during administration.
Can the company survive administration?
Yes. The first statutory purpose of administration is rescue. If the administrator can restructure the company’s affairs and return it to solvency, the company can emerge from administration and continue trading independently. Alternatively, the business can be sold as a going concern, preserving jobs and contracts even if the original company entity enters liquidation.
How long does company administration last?
The statutory maximum is 12 months, extendable by creditor consent (up to 6 months) or court order. Most administrations resolve within 6-12 months. Business sales often complete within the first few months, with the remaining time spent on settlement and distribution.
Do employees lose their jobs in administration?
Not necessarily. Employees are not automatically made redundant. The administrator decides whether to retain staff, and employees kept beyond 14 days are “adopted” with enhanced payment priority. If the business is sold, TUPE may transfer employees to the buyer. If redundancies are necessary, employees can claim from the National Insurance Fund.
Sources
Insolvency Act 1986 — Part II and Schedule B1 (administration), paragraph 99 (adoption of employment contracts)
Insolvency (England and Wales) Rules 2016 — Part 3 (administration procedure)
Transfer of Undertakings (Protection of Employment) Regulations 2006
The Insolvency Service — guidance on administration outcomes and statistics
