Going into administration is a formal legal process where a financially distressed company is placed under the control of a licensed insolvency practitioner (an administrator) to try to rescue the business or, if rescue isn’t feasible, to maximise returns for creditors. What typically happens

• Appointment of an administrator: A licensed insolvency practitioner takes over management from the directors. This appointment can be made by the directors, a creditor, or the court.
• Moratorium (breathing space): A legal pause on creditor enforcement actions, giving the company space to assess options and propose a plan.
• Review and proposals: The administrator evaluates the company’s finances and drafts administration proposals within about eight weeks for creditors to vote on.
• Possible outcomes:
  • The business is rescued and continues trading under new or retained arrangements.
  • The company is sold as a going concern or its assets are sold off.
  • The company is wound up and dissolved if rescue or sale isn’t feasible.

Key concepts

• Insolvency: Administration generally occurs when a company cannot pay its debts as they fall due.
• Directors vs. administrator: Day-to-day control moves from the directors to the administrator during administration.
• Pre-pack administration: A common arrangement where a sale of the business or assets is agreed before formal administration is filed, with the administrator executing the sale.

What it means in practice

• For many businesses, administration is a restructuring phase rather than an immediate end. It can protect the company from creditor actions while a plan is formed, with the aim of returning the business to solvency or, at minimum, achieving a better outcome for creditors than a straightforward liquidation.
• For creditors and stakeholders, administration provides a transparent process to assess viability and maximize potential recoveries.

If you’d like, I can tailor this explanation to a specific country’s rules (for example, the UK’s Insolvency Act framework or another jurisdiction) and provide practical implications for directors, employees, suppliers, or creditors.