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Insolvency

Administration

Introduction

If a company finds itself in financial difficulty, the two main options available to it are:

 Administration. This aims to rescue the company so that it may continue trading
as a going concern.

 Liquidation. This winds up the company, thus bringing its life to an end.

Purpose

Administration involves the appointment of an insolvency practitioner,
known as an administrator, to manage the affairs, business and
property of a company. It was first introduced by Schedule 16
Insolvency Act 1986, but has subsequently been amended by the
Enterprise Act 2002.

Administration is often used as an alternative to putting a company into
liquidation, for example to:

 Rescue a company in financial difficulty with the aim of allowing it
to continue as a going concern

 Achieve a better result for the creditors than would be likely if the
company were to be wound up

 Realise property to pay one or more secured or preferential
creditors.

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