{"id":193532,"date":"2025-04-23T03:35:21","date_gmt":"2025-04-23T02:35:21","guid":{"rendered":"https:\/\/legalvision.co.uk\/?p=193532"},"modified":"2025-04-29T02:41:06","modified_gmt":"2025-04-29T01:41:06","slug":"company-administration","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/corporations\/company-administration\/","title":{"rendered":"Legal Implications of Company Administration"},"content":{"rendered":"\n<p>During the lifecycle of your business, it is essential to consider the various options available if your business encounters financial difficulties. Some routes are used to ensure the business can continue as a \u2018going concern\u2019, and others focus on returning value to creditors of the company. <a href=\"https:\/\/legalvision.co.uk\/corporations\/business-owed-money-administration\/\">Administration<\/a> is one option you can use to rescue an insolvent business as a \u2018going concern.\u2019 This article explains how administration works and the legal implications for your company.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Insolvency&nbsp;<\/h2>\n\n\n\n<p>Generally, a company is at risk of or has become insolvent, where it is unable to pay its debts as they fall due. This includes situations where a company is unable to meet financial obligations. For example, an insolvent company is in a state where it:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>cannot pay its bills when they are due; or&nbsp;<\/li>\n\n\n\n<li>has more liabilities than assets on its balance sheet.&nbsp;<\/li>\n<\/ul>\n\n\n\n<div  class=\"box box--icon box--info\">\n    <p>It is crucial to closely monitor the financial position of your company as a director. There is a risk of personal liability on the directors of a company that knew, or reasonably should have known, that the company is trading insolvent. If you find yourself in this position, you must also take steps to minimise losses to potential creditors.<\/p>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\">How Does a Company Enter Administration?<\/h2>\n\n\n\n<p>A company can enter administration in two main ways:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>through a court order; or&nbsp;<\/li>\n\n\n\n<li>via an out-of-court appointment.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>The court route involves applying to the court for an administration order. At the same time, the out-of-court method allows directors, the company or a qualifying floating charge holder to appoint an administrator without court involvement, provided certain conditions are met.<\/p>\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\/2023\/05\/19030711\/Screen-Shot-2023-05-19-at-12.06.02-pm.png\" alt=\"Front page of publication\"\n                 loading=\"lazy\" width=\"208\" height=\"298\">\n                <section>\n            <div class=\"text-2xl font-bold\">Board Resolution<\/div>\n            <div class=\"body-text\">\n                <p>This template helps you document important and major decisions or actions reached in board meetings. <\/p>\n            <\/div>\n            \n\n<a 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The key way that administration facilitates this is by allowing a company respite from creditor action.&nbsp;<\/p>\n\n\n\n<p>The process involves handing over your company to an insolvency practitioner, also known as an administrator. During this period, your company benefits from the \u2018statutory moratorium period\u2019. This means that creditors are unable to take action against your company to recover debts without first obtaining permission from the court. Upon appointment, directors must provide the administrator with a <a href=\"https:\/\/legalvision.co.uk\/corporations\/solvency-statement\/\">Statement of the Company\u2019s Affairs<\/a> within 11 days. This will contain details of all the company\u2019s assets and liabilities, and must specify any assets which are subject to fixed or floating charges.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What Role Does the Administrator Have?&nbsp;<\/h2>\n\n\n\n<p>The administrator manages the company and oversees the administration process. Within eight weeks, they must formulate proposals for administration that creditors then vote on to approve. Generally, administrators have wide powers in relation to the management of the company. They can:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>sell any assets of the business;&nbsp;<\/li>\n\n\n\n<li>carry on business; or&nbsp;<\/li>\n\n\n\n<li>enter into contracts or other arrangements on the company\u2019s behalf.&nbsp;<\/li>\n<\/ul>\n\n\n\n<div  class=\"box box--icon box--star\">\n    <p>Whilst doing so, they have the duty to act impartially, honourably and in good faith. The duty of an administrator lies with the creditors collectively. This means they cannot act on the instructions of one creditor without considering the interests of all creditors involved.<\/p>\n<\/div>\n\n\n\n<p>The administrator, once approval has been obtained by creditors, will implement their proposals, which may include:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/legalvision.co.uk\/corporations\/restructure-company\/\">restructuring the business<\/a>;&nbsp;<\/li>\n\n\n\n<li>selling parts of the business;<\/li>\n\n\n\n<li>selling assets to raise funds; and<\/li>\n\n\n\n<li>negotiating with creditors.<\/li>\n<\/ul>\n\n\n\n<p>Importantly, if you find yourself in administration as a director of your company, you lose your management powers. This does not mean that you will be automatically removed from the board of directors. You are still required to comply with director duties throughout the process.&nbsp;<\/p>\n\n\n\n<div  class=\"box box--icon box--info\">\n    <p>The process as a whole generally lasts up to a year, but can be extended with the consent of creditors or the court.<\/p>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\">What is the Outcome of Administration?<\/h2>\n\n\n\n<p>The administration can end in several ways:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>the company is rescued and returns to normal trading;<\/li>\n\n\n\n<li>a Company Voluntary Arrangement is agreed;<\/li>\n\n\n\n<li>the company is sold as a going concern; or&nbsp;<\/li>\n\n\n\n<li>the company enters liquidation if rescue is not possible.&nbsp;<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Key Takeaways&nbsp;<\/h2>\n\n\n\n<p>Administration is designed to rescue insolvent companies or achieve a better result for creditors than immediate liquidation. Directors must act promptly when facing insolvency to avoid personal liability. During administration, the administrator takes control of the company, while directors retain their duties but lose management powers. A moratorium prevents most creditor actions during administration. The process typically lasts up to a year but can be extended for an additional period. Possible outcomes include rescue, sale of the business, or liquidation if rescue is not achievable.<\/p>\n\n\n\n<p>If your business is struggling to meet its liabilities, our experienced&nbsp;<a href=\"https:\/\/legalvision.co.uk\/corporate-lawyers-lp\/\">corporate lawyers<\/a>&nbsp;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 on&nbsp;<a href=\"tel:+448081968584\">0808 196 8584<\/a>&nbsp;or visit our&nbsp;<a href=\"https:\/\/legalvision.co.uk\/membership\/\">membership page<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Frequently Asked Questions<\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1745375197218\"><strong class=\"schema-faq-question\">Can employees be made redundant during administration?<\/strong> <p class=\"schema-faq-answer\">Yes, the administrator can make redundancies if necessary to rescue the company or achieve the best outcome for creditors.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1745375211675\"><strong class=\"schema-faq-question\">How does administration affect contracts with suppliers and customers?<\/strong> <p class=\"schema-faq-answer\">Existing contracts generally remain in force, but the administrator may choose to continue or terminate them based on the company\u2019s best interests.<\/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=\"4d339a24e7\" \/><input type=\"hidden\" name=\"_wp_http_referer\" value=\"\/api\/wp\/v2\/posts\/193532\" \/>            <input value=\"https:\/\/legalvision.co.uk\/corporations\/company-administration\/\" type=\"hidden\" name=\"currenturl\"\n                   id=\"currenturl\">\n            <input value=\"Legal Implications of Company Administration\" 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>During the lifecycle of your business, it is essential to consider the various options available if your business encounters financial difficulties. Some routes are used to ensure the business can continue as a \u2018going concern\u2019, and others focus on returning value to creditors of the company. Administration is one option you can use to rescue<a href=\"https:\/\/legalvision.co.uk\/corporations\/company-administration\/\">Continue reading <span class=\"sr-only\">&#8220;Legal Implications of Company Administration&#8221;<\/span><\/a><\/p>\n","protected":false},"author":13458,"featured_media":191810,"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":"","_relevanssi_noindex_reason":"","editor_notices":[],"footnotes":""},"categories":[28],"tags":[20,123,125,2460],"class_list":["post-193532","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-corporations","tag-small-business","tag-administration","tag-insolvency","tag-company-administration"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin 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