{"id":176080,"date":"2022-09-27T12:35:04","date_gmt":"2022-09-27T11:35:04","guid":{"rendered":"https:\/\/legalvision.co.uk\/?p=176080"},"modified":"2025-07-02T00:39:02","modified_gmt":"2025-07-01T23:39:02","slug":"business-owed-money-administration","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/corporations\/business-owed-money-administration\/","title":{"rendered":"My Business is Owed Money. What is Administration in England?"},"content":{"rendered":"\n<p>As a business owner, you are likely, at times to be owed money by other businesses. Usually, the other company will pay you the owed money within the agreed timeframe of your credit agreement, and you will not need to consider legal action. However, a company can experience financial difficulties and become involved in a <a href=\"https:\/\/legalvision.co.uk\/corporations\/pre-insolvency-moratorium\/\" target=\"_blank\" rel=\"noreferrer noopener\">formal insolvency proceeding<\/a> managed by an administrator for the company&#8217;s debts. This is business administration in England. If the administration process affects a business that <a href=\"https:\/\/legalvision.co.uk\/disputes-litigation\/recover-money-owed\/\" target=\"_blank\" rel=\"noreferrer noopener\">owes you money<\/a> as one of its creditors, you need to understand how this administration affects you.&nbsp;<\/p>\n\n\n\n<p>This article will explain the administration process for you as a director or shareholder of a limited company in a small to medium-sized trading business owed money.&nbsp;It will explain, for example, that the company assets of the business, such as the company&#8217;s property, can be sold off to pay its debts. The article also explains the position of the company&#8217;s creditors, which includes secured creditors and unsecured creditors.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Purpose and Outcome of Administration<\/h2>\n\n\n\n<p>Business administration in England is one of a few <a target=\"_blank\" rel=\"noreferrer noopener\" href=\"https:\/\/www.gov.uk\/government\/publications\/liquidation-and-insolvency\/liquidation-and-insolvency\">formal insolvency proceedings<\/a> that you, as a creditor owed money, may become involved in.&nbsp;<\/p>\n\n\n\n<p>The stakeholders that can apply to the court to issue an administrative order are:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>the company\u2019s shareholders on behalf of the company, provided the shareholders pass a resolution;&nbsp;&nbsp;<\/li><li>the company\u2019s directors through a board resolution;&nbsp;<\/li><li>any creditor such as a preferential creditors; and<\/li><li>certain other insolvency officials such as a liquidator.&nbsp;<\/li><\/ul>\n\n\n\n<p>An administrator is appointed by the court when a company is in business administration in England. They will first try to rescue the company\u2019s business. However, if there is no reasonable chance of saving the business, they can wind the business up. Winding up a business is where a company\u2019s assets are sold off, and the proceeds pay off the creditors according to their legal rights. Alternatively, the administrator may conclude that they can rescue the business but that a rescue would put the <a href=\"https:\/\/legalvision.co.uk\/corporations\/revolving-credit-facility\/\" target=\"_blank\" rel=\"noreferrer noopener\">creditors<\/a> in a worse position than a wind-up. In this case, the administrator can proceed with a wind-up.<\/p>\n\n\n\n<div  class=\"box box--icon box--info\">\n    <p>There are several ways an administrator can rescue a company. Most rescues end with the administrator selling the company to a buyer at a discount. The terms of the sale usually require the buyer to inject cash into the business, which the business must use to pay off the creditors. You may receive the total value of the debt, or you may receive less.<\/p>\n<\/div>\n\n\n\n<p><span style=\"font-weight: 400\">Where you receive less money than the business owes you following the sale of the business, this is because the administrator determined this was the fairest option. You would have received less money than if the company was wound up.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Rights of a Trade Creditor in an Administration<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">The administrator must act on behalf of all the creditors according to their legal interests in the company when a company is in business administration in England. Companies in administration often owe money to more than one creditor. For instance, the company may owe you money, as well as its bank. The administrator must treat all creditors fairly, although not all creditors have the same rights. For instance, as a trade creditor, your interests likely differ from a financial creditor such as a bank.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">As is often the case, after a wind up, there may not be enough money to pay back the creditors in full. In this case, you and the other creditors will only get back a portion of your money. This portion will be equal to your share of the total debt of your class of creditors.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">For instance, suppose a company owes you \u00a3100,000 and \u00a3200,000 to three other creditors. The total debt owed to your class is \u00a3300,000, and your debt is 30% of this. If, after all other creditors with a higher priority are repaid, there is only \u00a330,000 left, you will only get \u00a310,000 back.&nbsp;<\/span><\/p>\n\n\n\n    <div class=\"my-7 lg:my-10 border-y-2 border-gray-100 py-7 lg:py-10 flex flex-col sm:flex-row items-start gap-10\">\n                    <img decoding=\"async\" class=\"w-52 mx-auto my-0! rounded\" src=\"https:\/\/img.legalvision.com.au\/wp-content\/uploads\/sites\/4\/2022\/09\/06164254\/uk-startup-manual-290x410-1.jpg\" alt=\"Front page of publication\"\n                 loading=\"lazy\" width=\"208\" height=\"298\">\n                <section>\n            <div class=\"text-2xl font-bold\">UK Startup Manual<\/div>\n            <div class=\"body-text\">\n                <p>LegalVision&#8217;s Startup Manual is essential reading material for any startup founder looking to launch and grow a successful startup.<\/p>\n            <\/div>\n            \n\n<a href=\"https:\/\/go.legalvision.co.uk\/uk-startup-manual.html\" class=\" block px-5 py-3.5 max-w-fit bg-orange button__hover transition rounded text-white font-bold text-lg no-underline uppercase leading-tight text-center\" target=\"\" rel=\"\">Download Now<\/a>        <\/section>\n    <\/div>\n\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Order of Priority and Class Composition<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">The law determines classes of creditors by looking at their rights and interests in the business. There are two classes of creditors:<\/span><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td>\n<p><b>Secured creditors<\/b><\/p>\n<\/td><td>\n<p><span style=\"font-weight: 400\">These are usually banks that have given the company a loan secured on the company\u2019s assets. Usually, the security package will be over all of the company\u2019s assets, and only a single creditor will own this security interest.&nbsp;<\/span><\/p>\n<\/td><\/tr><tr><td>\n<p><b>Unsecured creditors<\/b><\/p>\n<\/td><td>These include all other financial and trade creditors who loan money without receiving any security.&nbsp; <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><span style=\"font-weight: 400\">Secured creditors always get paid back first as they have first priority on the company\u2019s assets. If the company is wound-up, all assets are sold, and all proceeds go first to the secured creditors. If there is anything left, it goes to the unsecured creditors.&nbsp;<\/span><\/p>\n\n\n\n<div  class=\"box box--icon box--info\">\n    <p>The law distinguishes between different types of unsecured creditors, but some may have higher priority than others. For instance, employees can receive a small portion of unpaid wages before other unsecured creditors, including trade creditors like you, get back any of their money.<\/p>\n<\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Moratorium&nbsp;<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">One of the most significant effects of administration on your rights as a creditor is that you lose the ability to claim against the company individually. Once the court orders the company into administration, you cannot try and sue the company to recover your money. This is called a moratorium and lasts for the duration of the process.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">The purpose of the moratorium is to:<\/span><\/p>\n\n\n\n<ol class=\"wp-block-list\"><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">give the administrator time to order the company\u2019s affairs;<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">not burden the court with numerous related claims that it would otherwise have to manage individually; and<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">encourage all creditors to work together.<\/span><\/li><\/ol>\n\n\n\n<p><span style=\"font-weight: 400\">While you are not obligated to participate in the administration, it is almost always in your interest.&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Challenging the Administrator<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">You can only challenge the administrator if you believe:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">you suffered unfair harm, such as if the administrator did not recognise your rights as a creditor of a particular class;&nbsp;<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">the administrator has acted inefficiently, such as by selling off assets far below market value; or&nbsp;<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">the administrator has acted incorrectly.<\/span><\/li><\/ul>\n\n\n\n<p><span style=\"font-weight: 400\">Further, you must apply to the court to challenge the administrator. The court may then remove the administrator if it is satisfied with the claim. It may even order the administrator to pay damages, though this rarely happens in practice.&nbsp;<\/span><\/p>\n\n\n\n\n<a href=\"#content-next\"\n   class=\"block p-4 mt-10 text-xl font-bold text-center text-white no-underline bg-gray-800 rounded-t-xl\">\n    Continue reading this article below the form\n    <i class=\"text-xl fa-regular fa-arrow-down\"><\/i>\n<\/a>\n<div class=\"px-6 pt-10 pb-12 mb-10 text-center bg-gray-100 rounded-b-xl sm:px-12 test\">\n    <div class=\"mb-8 text-2xl font-bold text-orange\">\n        Need legal advice?\n        <br>\n        <span class=\"text-lg not-prose\">\n                            Call <a href=\"tel:+448081968584\" class=\"not-prose\">0808 196 8584<\/a> for urgent assistance.\n                <br>\n                Otherwise, complete this form, and we will contact you within one business day.\n                    <\/span>\n    <\/div>\n\n    \n\n<div class=\"not-prose flex justify-center text-left gform_input_bg_white    \">\n    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They will first try and rescue the business where there is a good chance it will work, and creditors like you will not be worse off than if the company is wound up. If the administrator cannot rescue the company or thinks the creditors will be better served following a wind up, they will sell off the company\u2019s assets. The next step is distributing the sale proceeds to pay back you and other creditors the money due to them according to their rights as creditors. Secured creditors always get paid first, followed by unsecured creditors. As a trade creditor, you are likely to be an unsecured creditor.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">If you need help with your business, our experienced <\/span><a href=\"https:\/\/legalvision.co.uk\/corporate-lawyers-lp\/\"><span style=\"font-weight: 400\">corporate lawyers<\/span><\/a><span style=\"font-weight: 400\"> can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today at <a href=\"tel:+448081968584\" class=\"AVANSERnumber dynamic-number\">0808 196 8584<\/a> or visit our <\/span><a href=\"https:\/\/legalvision.co.uk\/membership\"><span style=\"font-weight: 400\">membership page<\/span><\/a><span style=\"font-weight: 400\">.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Frequently Asked Questions&nbsp;<\/span><\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1664221351677\"><strong class=\"schema-faq-question\"><strong>What is administration?<\/strong><\/strong> <p class=\"schema-faq-answer\">Administration is a kind of insolvency process. A court appoints or approves an administrator who handles the process. The administrator\u2019s overriding goal is to ensure creditors get as much money back as possible through a rescue or wind-up.\u00a0<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1664221423816\"><strong class=\"schema-faq-question\"><strong>In whose interests does the administrator act?<\/strong><\/strong> <p class=\"schema-faq-answer\">The administrator acts in the interests of all the creditors according to their legal rights against the company.\u00a0<\/p> <\/div> <\/div>\n<div class=\"not-prose m-feedback-prompt\">\n    <!-- Thumbs up\/down bar -->\n    <div class=\"m-feedback-prompt__main\">\n        <div class=\"m-feedback-prompt__title\">Was this article helpful?<\/div>\n        <div>\n            <!--span class=\"m-feedback-prompt__button--text\">Thanks!<\/span-->\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--yes\"\n                    data-analytics-link=\"feedback-prompt:yes\" aria-label=\"Agree\">\n                <i class=\"fa-regular fa-thumbs-up fa-3x\"><\/i>\n            <\/button>\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--no\"\n                    data-analytics-link=\"feedback-prompt:no\" aria-label=\"Disagree\">\n                <i class=\"fa-regular fa-thumbs-down fa-3x\"><\/i>\n            <\/button>\n        <\/div>\n    <\/div>\n\n    <!-- Feedback form -->\n    <div class=\"m-feedback-prompt__form\">\n        <div class=\"m-feedback-prompt__form--thanks \">\n            <div>Thanks!<\/div>\n            <p>\n                We appreciate your feedback \u2013 your submission has been successfully received.            <\/p>\n        <\/div>\n        <form id=\"contact-form\" class=\"m-feedback-prompt__form--form\" action=\"\" method=\"post\">\n            <input type=\"hidden\" id=\"authenticity_token\" name=\"authenticity_token\" value=\"9eb4f72322\" \/><input type=\"hidden\" name=\"_wp_http_referer\" value=\"\/api\/wp\/v2\/posts\/176080\" \/>            <input value=\"https:\/\/legalvision.co.uk\/corporations\/business-owed-money-administration\/\" type=\"hidden\" name=\"currenturl\"\n                   id=\"currenturl\">\n            <input value=\"My Business is Owed Money. What is Administration in England?\" type=\"hidden\" name=\"currenttitle\"\n                   id=\"currenttitle\">\n            <label>\n                <!-- display on thumbs-up -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--yes\">\n                    Can you tell us <span class=\"font-semibold\">why<\/span> you found it helpful?\n                <\/span>\n\n                <!-- display on thumbs-down -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--no text-lg\">\n                    How can we better improve this article?\n                <\/span>\n                <textarea name=\"feedbackmessage\" id=\"feedbackmessage\" required><\/textarea>\n            <\/label>\n\n            <div class=\"m-feedback-prompt__form--error\" id=\"form-submit-error\"><\/div>\n            <button id=\"submit-contact-form-button\" type=\"submit\" name=\"commit\" class=\"m-feedback-prompt__form--submit\"\n                    data-analytics-link=\"feedback-prompt:submit\">\n                Submit            <\/button>\n        <\/form>\n    <\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>As a business owner, you are likely, at times to be owed money by other businesses. Usually, the other company will pay you the owed money within the agreed timeframe of your credit agreement, and you will not need to consider legal action. However, a company can experience financial difficulties and become involved in a<a href=\"https:\/\/legalvision.co.uk\/corporations\/business-owed-money-administration\/\">Continue reading <span class=\"sr-only\">&#8220;My Business is Owed Money. What is Administration in England?&#8221;<\/span><\/a><\/p>\n","protected":false},"author":13522,"featured_media":3234,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"1575,173086,173219,2408,1739,2307","_relevanssi_noindex_reason":"","editor_notices":[],"footnotes":""},"categories":[28],"tags":[20,123,124,125],"class_list":["post-176080","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-corporations","tag-small-business","tag-administration","tag-trading-whilst-insolvent","tag-insolvency"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.1.1 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>What is Business Administration in England? | LegalVision UK<\/title>\n<meta name=\"description\" content=\"If your business is owed money by a company in business administration in England, you need to know the effect on you. 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