Going into administration is a formal insolvency process used when a company cannot pay its debts as they come due. A licensed insolvency practitioner (the administrator) takes control of the company with the aim of either rescuing the business as a going concern, achieving a better result for creditors than immediate liquidation, or realizing the value of the company’s assets through a controlled exit. While in administration, a legal moratorium protects the company from certain creditor action, giving time to assess options and stabilise finances. Key implications and common questions

• Control and management: Directors stay on the books but do not run the business day-to-day; the administrator manages the company and makes strategic decisions to rescue, restructure, or liquidate assets. This shifts decision-making from the board to the administrator during the process.
• Purpose and outcomes: The administrator’s objectives are to rescue the company as a going concern, or to achieve a better return for creditors than immediate liquidation would provide. If rescue isn’t feasible, the administrator may wind down operations and distribute assets to creditors.
• Protection from creditors: A moratorium is typically put in place, preventing certain creditor actions (like winding-up petitions or enforcement) while the company is assessed and a plan is considered. This breathing space helps prevent a disorderly collapse.
• Impact on stakeholders:
  • Creditors: The administration aims to preserve value for creditors, with a statutory order of priority for repayment.
  • Employees: They may be affected by changes in employment terms, potential restructuring, or redundancy; certain protections and redundancy rights still apply.
  • Directors: They retain some duties and responsibilities but must cooperate with the administrator; in many cases, directors’ roles are redefined during administration.
• Possible routes out of administration:
  • Rescue or sale: The business or its assets may be sold to another company, investor, or back to management to continue trading.
  • Pre-pack arrangements: In some jurisdictions, a sale of the business can be arranged quickly with a pre-agreed plan, subject to meeting regulatory and ethical standards.
  • Liquidation: If rescue isn’t viable, the administrator may wind down the company and distribute proceeds to creditors.
• Legal equivalence in other jurisdictions: The specific procedures and protections vary by country, but the overarching concept—a process designed to maximize creditor returns while giving a struggling business a chance to recover—is common in many insolvency regimes.

If you’re facing this situation as a company director or a creditor, it may be helpful to seek professional guidance from an insolvency practitioner who can explain options tailored to the particular circumstances, including potential pre-pack considerations, rescue plans, or orderly wind-down strategies.