What is an Administration Procedure?

Showing working together in Insolvency Administration

The administration procedure provides an insolvent company with a period of protection during which time creditors may take no action against the company without permission of the Court. This allows the administrator and the directors to formulate a strategy for the way forward. The Enterprise Act introduced statutory purposes for an administration.

What is the Administration Purpose?

An administrator must perform his functions with the objective of:

Rescuing the company as a going concern; or

Achieving a better result for a company’s creditors as a whole than would be likely if the company were wound up; or

Realise property in order to make a distribution to the company’s secured or preferential creditors.

These alternative purposes are listed in the order they must be considered by the administrator. For example, if the administrator believes it is not reasonably practicable to achieve the first purpose, the second purpose will apply, and so on. Once a company enters administration, the management of the company is placed under the control of the administrator.