Going into administration is a formal insolvency process designed to protect a company that is insolvent and give it a chance to be rescued or to achieve a better outcome for creditors than immediate liquidation. Key points:

• Appointment and control: An licensed insolvency practitioner (the administrator) is appointed to take over the company’s management from the directors. This typically happens via court order or by a cooperation between directors, lenders, or a creditor.

• Moratorium on action: While in administration, a legal moratorium generally prevents creditors from taking enforcement actions without the administrator’s consent, giving the company breathing space to reorganize.

• Objectives and outcomes: The administrator reviews options with the aim of one or more of the following: rescue of the business as a going concern, sale of the business or its assets to maximize returns to creditors, or achieving a better result for creditors than immediate liquidation. If a rescue isn’t viable, liquidation may follow.

• Impact on directors: Directors lose day-to-day control, though they may remain involved in some capacity depending on the rescue plan and ongoing restructuring. Misconduct or wrongful trading concerns can be investigated later.

• What this means for staff, creditors, and others: Employees’ rights continue under certain protections, and creditors are paid according to a statutory priority (secured, preferential, unsecured). The administration process involves communicating with stakeholders and publishing proposals within a defined timeframe.

Common misconceptions:

• It does not always mean the end of the company; it can be a pathway to restructure and continue, or to sell the business as a going concern.

• The company can still trade during administration, but under the administrator’s oversight.

Precise definitions can vary by jurisdiction, but in the UK, which many references describe, administration is a court-supervised process under insolvency law with the central aim of maximizing value for creditors while giving the company a chance to restructure or be disposed of.

If you’d like, I can tailor this to a specific country or provide a quick checklist for directors facing administration, with steps to protect the business and employees.