Administration – What is administration?

Administration is a way of dealing with personal or corporate debts that you cannot pay when they become due.

Your business is “in administration” when an administrator has been appointed to manage your company’s affairs, business and property for the benefit of your creditors. The administrator is an insolvency practitioner and has the status of an officer of the court, although they might not have been appointed by the court.

An administrator can be appointed by:

• the courts – on application from a creditor, directors or partners
• the holder of a qualifying floating charge over the assets of the business
• the company or its directors

When your company goes into administration, its credit debts and certain other debts are all treated together. Your company then makes a single payment to the administrator every month, which is then divided among the creditors.

(In cases dealing with personal debt, it is usually the individual who applies to the court for an administration order and the individual makes payments to the court.)

Once your or your company is in administration, its creditors cannot take any further action against you.

A company goes into administration for two reasons: to rescue the company or as a stage of winding a company up. (Winding up is another term for liquidation.)

Rescuing the company

Your company might go into administration so it can be rescued as a going concern (as a functioning company) and get it back into a position where it is trading profitably.

Winding up

Your company might go into administration so its assets realise their value more favourably for the creditors than they would do were your company wound up without first being in administration.

More information

• Administration – What is administration?
• Administration – The administration process
• Administration – What is a composition order?
• Administration – What is an administrative receiver?
• Administration – The advantages of administration
• Administration – The disadvantages of administration
• Administration – I can’t afford to make my administration payments
• Administration – The alternatives to administration
• Administration – Insolvency and administration
• Administration – Voluntary and involuntary administration