Administration is a process that can be used to preserve a business or to wind-up its affairs. It is a procedure available to insolvent companies who are able to meet one of a number of specified criteria. The process should either facilitate the survival of the company as a going concern; provide for a better outcome than would be the result of liquidation; or facilitate the realisation of assets that will ensure a return to one or more secured or preferential creditors.

It can be the result of an application by the company (by resolution of its shareholders); by the board of directors of the company; by a secured creditor with a qualifying floating charge; or by one or more creditors.

A successful application will result in the appointment of a licensed insolvency practitioner as Administrator of the company. The appointed Administrator will have extensive powers in relation to the company. He can: cause it to continue trading; close and sell the business; sell parts of the business; raise finance in the company’s name; hire and fire directors etc.

The Administrator will be required to put a proposal to the company’s creditors to demonstrate how he proposes to achieve one or more of the objectives of the administration process. This may involve a sale of the business; seeking approval of a company voluntary arrangement (“CVA”); or a winding-up of the business.

The administration process will generally last no longer than 12 months although this can be extended through an application to the Court. At the end of the process the company will exit through a CVA, a liquidation, or simple dissolution.