Company Administration

Company Administration

Company administration is a legal process designed to protect a company from creditors while giving it a chance to reorganise, recover, or, if necessary, wind down in an orderly manner. When a company goes into administration, an administrator—a licensed insolvency practitioner—is appointed to manage the company’s affairs, business, and assets. The administrator acts as an Officer of the Court and works to achieve the best outcome for the company’s creditors.

Objectives of Company Administration

The goals of administration are:

1. Rescuing the company as a going concern.
2. Maximising asset value for the benefit of creditors compared to what could be achieved through liquidation.
3. Distributing proceeds to preferential creditors if the company cannot be rescued.

How Does a Company Enter Administration?

A company can go into administration through:

• Court Order: When a creditor or the company applies to the court.
• Floating Charge Holder Appointment: The holder of a qualifying floating charge appoints an administrator.
• Company or Directors’ Appointment: Directors or the company appoint an administrator out of court.

What Happens During Administration?

1. Moratorium:
   Once administration begins, creditors are prevented from taking legal action or continuing insolvency proceedings without the administrator’s consent or court approval.
2. Resignation of Receivers:
   Any administrative receivers or property receivers must vacate office.
3. Notifications:
   The administrator must:
   • Notify The Gazette (the official public record).
   • Inform a local newspaper where the company operates.
   • Notify Companies House, the company itself, and all creditors.

Administrator’s Responsibilities

The administrator must:

• Issue a Statement of Affairs: Request this from company directors and submit it to Companies House.
• Prepare Proposals: These outline how the administration will meet its objectives. The proposals must be sent to:
  • Companies House.
  • All known creditors.
  • Relevant company members.

Proposals must be submitted within eight weeks of entering administration and include an invitation to a creditors’ meeting to seek approval. Outcomes of the meeting could include:

• Forming a creditors’ committee.
• Approving further meetings.
• Dealing with correspondence between creditors and members.

How Does Administration End?

Administration can end in several ways:

• Time Expiry: The administrator’s term, typically 12 months, ends unless extended with creditors’ or court consent.
• Achieved Purpose: The administration’s objectives are met, and the administrator files a notification with the court.
• Voluntary Winding-Up: The administrator converts the process to a Creditors Voluntary Liquidation (CVL) if it’s deemed appropriate.
• Dissolution: The company is dissolved if it has no distributable assets, with dissolution occurring three months after filing the notice with Companies House.
• Court Discharge: The court can end the administration if creditors challenge its purpose or the administrator believes its objectives cannot be met.

Conversion to a CVL

An administrator can transition the company into a CVL if:

• Secured creditors are likely to be paid.
• A distribution to unsecured creditors is expected.

Useful Links for Further Reading

• Insolvency Service: Administration Guidance Offers practical guidance for directors, creditors, and insolvency practitioners about the administration process.
• Companies House: Filing Requirements for Administration Details reporting and filing obligations for administrators.
• Corporate Insolvency and Governance Act 2020 Provides the legal framework for insolvency, including administration.

For more detailed insights into company administrations, explore our Business data product which provides extensive Company Data on all UK registered companies.