Company administration is a formal insolvency process where a licensed insolvency practitioner takes control of a struggling company to try to rescue it, sell its business, or get creditors a better return than liquidation would. It gives the company breathing space from creditor action while a solution is worked out.
For directors, administration can feel like losing control at a difficult moment. In practice, it is a structured, legally protected process with a clear purpose and a defined timeline. This guide explains what administration is, how a company enters it, what changes for directors, and what typically happens next. If you are still weighing up whether administration is the right route, our overview of company insolvency options compares it against the alternatives.
What administration is and its three statutory aims
Company administration is governed by Schedule B1 of the Insolvency Act 1986. An administrator — always a licensed insolvency practitioner — is appointed to run the company instead of the directors, working towards one of three statutory objectives, considered in order:
- Rescuing the company as a going concern — keeping the business trading under new arrangements, if this is realistically achievable.
- Achieving a better result for creditors than would likely follow if the company simply went into liquidation.
- Realising property to pay secured or preferential creditors, where neither of the above is possible.
The administrator must consider these aims in that order and can only move to the second or third if the one before it is not reasonably achievable. This structure is what separates administration insolvency from a straightforward wind-down.
How does company administration work: entering the process
A company can enter administration in a few ways. Most commonly, the directors themselves make the decision, appoint an insolvency practitioner, and file the necessary paperwork at court — this is known as an "out of court" route and is the fastest option. A qualifying floating charge holder (typically a lender with security over the company's assets) can also appoint an administrator directly.
Alternatively, the company, its directors, or a creditor can apply to court for an administration order. The court route is slower, since it requires a hearing, but may be necessary where there is a dispute or where no qualifying floating charge exists. Whichever route is used, the appointment must be publicised, including a notice in The Gazette, so that creditors and other interested parties are formally informed.
Who can put a company into administration?
In practice, the decision usually comes from one of three directions:
- The directors, once they conclude the company is, or is likely to become, insolvent and administration offers the best available outcome.
- A qualifying floating charge holder, such as a bank or asset-based lender, exercising its rights under its security.
- A creditor or the company itself, applying to court where the out-of-court route is not available or appropriate.
Before a court appointment, notice must usually be given to any qualifying floating charge holder, giving them the opportunity to appoint their own choice of administrator instead. This protects secured lenders' interests within the wider administration process.
The moratorium: legal protection from creditors
The moment a company enters administration, it benefits from a moratorium — a legal pause on creditor action. During this period:
- No winding-up petition can be presented or continued against the company.
- Creditors cannot start or continue legal proceedings without the administrator's consent or the court's permission.
- Landlords cannot forfeit a lease by re-entering premises without permission.
- Secured creditors generally cannot enforce their security without consent.
This protection is one of the main reasons directors consider administration: it stops creditor pressure — including HMRC enforcement action — while the administrator assesses the company's options. The moratorium is not indefinite protection from debt; it is a pause that allows a considered outcome rather than a rushed one.
What the administrator does
Once appointed, the administrator takes over management of the company's affairs, business and property. Their duties include:
- Assessing the company's financial position and trading viability.
- Deciding, guided by the statutory aims, whether rescue, sale or asset realisation is the right path.
- Sending creditors a statement of proposals, usually within eight weeks of appointment.
- Seeking creditor approval for those proposals through a decision procedure.
- Reporting regularly on progress until the administration ends.
The administrator acts as an officer of the court and owes duties to creditors as a whole, not to the directors or any single creditor. This is a key difference from how directors normally run the business.
During this period the administrator may continue trading the business where it helps achieve the statutory aims, negotiate with landlords and suppliers, market the business or its assets for sale, and deal directly with HMRC and other creditors on the company's behalf. Directors are no longer the point of contact for these matters once an administrator is in place.
What happens to directors and management
Going into administration explained simply: the directors' powers to manage the company are suspended, not removed. They remain in post but cannot act without the administrator's consent, and they lose control over contracts, payments and day-to-day decisions.
Directors are legally required to cooperate with the administrator, including providing a statement of affairs setting out the company's assets, liabilities and creditors. Failure to cooperate can have serious consequences, including personal liability in some circumstances. Directors' conduct in the period leading up to administration may also be reviewed as part of the administrator's statutory duties.
Directors also keep certain protections during administration insolvency that they would not have in an uncontrolled collapse: the moratorium shields the company (and, indirectly, the directors) from the immediate legal pressure of creditor claims, giving everyone involved time to reach a considered outcome rather than a forced one.
Cost and the standard timeline
Administration costs are usually met from the company's assets, ahead of most other creditors, and are typically charged on a time-cost basis by the appointed insolvency practitioner, subject to creditor approval. Some fees may instead be agreed as a fixed amount or by reference to the value of assets realised, depending on what creditors approve. Costs vary considerably depending on the size and complexity of the company, so a fixed figure cannot usefully be quoted here.
Because administration is a formal court-recognised process with statutory reporting duties, it generally costs more than an informal restructuring, but this is offset by the legal protection and structure it provides. A regulated insolvency practitioner can give a director a realistic, case-specific estimate before appointment.
An administration order UK process usually lasts up to twelve months from the date the administrator is appointed. This can be extended by up to twelve further months with creditor consent, or for longer by court order if needed. Our guide on how long company administration lasts covers the extension process in more detail. The administrator must bring the process to an end as soon as its purpose has been achieved, rather than let it run longer than necessary. Further background on the process is available in gov.uk's guidance on company administration.
Possible outcomes: rescue, sale or liquidation
Administration is a means to an end, not the end itself. Depending on what proves achievable, it typically concludes in one of these ways:
- Company rescue — the business exits administration and continues trading, sometimes under a company voluntary arrangement with creditors.
- Sale of the business — the trade, assets or goodwill are sold to a new owner, which may preserve jobs and continuity even though the original company does not continue.
- Move into creditors' voluntary liquidation — where rescue or sale is not possible, the company moves from administration into liquidation to complete an orderly wind-down.
- Dissolution — in some cases, once the administration process is complete and there is nothing more to distribute, the company is dissolved and removed from the Companies House register.
Which outcome applies depends heavily on the company's trading position, its assets, and how quickly the administrator was brought in relative to the severity of the company's problems.
Frequently asked questions
How long does company administration last?
Administration usually lasts up to twelve months from the date of appointment, though it can be extended with creditor consent or by court order where more time is genuinely needed to complete the process.
Can directors buy the business back during administration?
Yes, this is possible and is sometimes arranged through a pre-pack administration, where the sale to a connected party — including the existing directors — is negotiated before or shortly after appointment. Strict rules and independent scrutiny apply to protect creditors' interests.
What happens to employees when a company goes into administration?
Employees may continue working if trading continues, be transferred to a buyer under employment protection rules if the business is sold, or be made redundant if trading cannot continue. The administrator handles these decisions as part of managing the company.
Is company administration the same as liquidation?
No. Administration aims to rescue the company or its business, or improve the outcome for creditors, while liquidation is the formal winding-up and closure of a company. Administration can lead into liquidation, but the two are distinct processes with different purposes.
Will administration affect the company's record at Companies House?
Yes. The appointment is publicly notified, including in The Gazette, and the company's status is updated at Companies House. This is a standard part of the formal process and is visible to third parties.
This article is general information, not legal, financial or insolvency advice. Every company's circumstances are different, and directors should speak to a regulated specialist before making decisions about their situation.
If you would like to understand your options, Harbourfirst can introduce you to a regulated insolvency practitioner or solicitor to talk it through — start an enquiry. Harbourfirst introduces directors to regulated specialists; it does not provide advice or act for you itself.