Administration

Company rescue: a second chance?

Administration is primarily a rescue tool for limited companies.

There are three entry routes into administration:

1. By an order of court

2. Appointment by a qualifying Floating Charge holder; or

3. Appointment by the company or its directors

Administration creates a moratorium which ring fences the company’s assets so that no legal action or process may be started or continued.

The company is placed under the day-to-day control and management of an administrator and may continue to trade (if applicable and supported) whilst the administrator reviews the company’s position and collates information.

An Administrator must act in the interests of all the creditors and must perform his functions with the objective of rescuing the company as a going concern. If this proves impossible he must achieve a better result for the company’s creditors as a whole than would be likely if the company were wound up. Failing that the administrator may realise property in order to make a distribution to one or more secured or preferential creditors.

Common routes out of administration are dissolution, Creditors Voluntary Liquidation or a Company Voluntary Arrangement.