Corporate and Business Law (Global) · Insolvency and administration

Administration and Administrators in Company Law

Updated 11 October 2026 · Fact-checked

Administration is a formal insolvency process that gives a struggling company breathing space under a licensed insolvency practitioner, the administrator. A moratorium stops most creditor action. The administrator tries to rescue the company, get a better result for creditors than liquidation, or realise assets to pay secured or preferential creditors.

Understand Administration and Administrators

Administration is a rescue-focused insolvency procedure. A company in financial trouble may still have a viable business or valuable assets. Liquidation would end the company and sell everything off quickly. Administration pauses the pressure so someone independent can look for a better outcome.

The person in charge is the administrator. This must be a qualified insolvency practitioner. The administrator takes control of the company's affairs. The administrator is an officer of the court, whether or not appointed by the court, and acts as the company's agent. Directors stay in office, but they may not exercise powers that would interfere with the administrator's functions, unless the administrator consents.

The key feature is the moratorium. While the company is in administration, no winding-up order can be made and no resolution can be passed to wind it up. There are limited exceptions, such as a public interest petition. Creditors also cannot enforce security, repossess goods held under hire purchase and similar agreements, or start or continue legal proceedings against the company without the administrator's consent or the court's permission. That consent or permission applies to these actions, not to starting a winding up. This protects the business while the administrator works.

The administrator must perform the functions for the first purpose, rescuing the company as a going concern, unless the administrator thinks that this is not reasonably practicable, or that the second purpose would achieve a better result for creditors as a whole. The second purpose is a better result for creditors as a whole than a liquidation would give. The third purpose, realising property to make a distribution to one or more secured or preferential creditors, applies only if neither of the first two is reasonably practicable. The administrator must also not unnecessarily harm the interests of creditors as a whole.

Administration is not the same as liquidation. In liquidation the company is wound up and ceases to exist. In administration the company continues, and it may come out as a rescued company, move into a company voluntary arrangement, or go into liquidation or dissolution.

Key formulas to remember

Purposes of administration: 1. Rescue the company as a going concern → 2. Better result for creditors as a whole than liquidation → 3. Realise property to make a distribution to one or more secured or preferential creditors; Perform for rescue unless the administrator thinks it is not reasonably practicable or that the second purpose would achieve a better result for creditors as a whole. The third applies only if neither of the first two is reasonably practicable, and it must not unnecessarily harm creditors as a whole.
Who can appoint an administrator: Court order (on application) | Holder of a qualifying floating charge | The company or its directors; Describe these routes in general terms. The appointee must be a licensed insolvency practitioner.
Moratorium effect: No winding-up order or winding-up resolution (apart from limited exceptions such as public interest petitions) | Administrator's consent or court permission needed to enforce security, repossess goods or bring legal proceedings; It protects the company, so the business can keep trading while the administrator acts. Consent or permission is not the test for starting a winding up.
Administrator's role: Officer of the court (whether or not appointed by the court); acts as agent of the company; owes duties to creditors as a whole; Directors remain in office but may not exercise powers that would interfere with the administrator's functions, unless the administrator consents.

How to solve Administration and Administrators questions

Use this method for any question on administration. It works for scenario and knowledge questions.

1Identify the process. Look for words such as rescue, breathing space, moratorium, or insolvency practitioner. These point to administration, not liquidation.
2Decide what the question asks: purpose, appointment, moratorium, or powers and duties.
3For purposes, start with rescue. Move to the second purpose if rescue is not reasonably practicable, or if a better result for creditors as a whole than liquidation can be achieved. Consider paying secured or preferential creditors only if neither of the first two is reasonably practicable.
4For appointment, match the facts to the route: court application, floating charge holder, or company or directors. Check that the person appointed is a licensed insolvency practitioner.
5For moratorium, test the creditor's action. If it is a winding-up order or resolution, it is barred (apart from limited exceptions such as a public interest petition). If it is enforcing security, repossessing goods or suing, it needs the administrator's consent or court permission.
6For powers and duties, remember the administrator manages the company's affairs and acts for creditors as a whole, not for directors or shareholders.
7Eliminate options that describe liquidation, such as ending the company's existence or selling everything immediately as the aim.
8Check your final choice against the exact wording of the question before you answer.

Quickest way: Rescue first, then creditors, then secured

When to use it: Use this in Section A or B objective questions where time is short and options look similar.

Spot the keyword: rescue or breathing space means administration.
Match the question to one of four themes: purposes, appointment, moratorium, powers.
Recall the order of purposes: rescue, better result than liquidation, pay secured or preferential creditors.
Remove any option that ends the company or favours directors or shareholders.
Pick the remaining option that fits the theme.

Common mistakes in Administration and Administrators

Saying the main purpose of administration is to wind up the company
Students mix administration with liquidation because both are insolvency procedures.
Fix: Remember administration aims first at rescue. Liquidation ends the company. Link administration with the word survival.
Listing the three purposes in the wrong order or treating them as equal choices
Students memorise the list but not the hierarchy.
Fix: State them in order: rescue first, then a better result for creditors than liquidation, then realising property for secured or preferential creditors. The administrator can pass over rescue if it is not reasonably practicable or if the second purpose gives creditors a better result. The third applies only if neither of the first two is reasonably practicable.
Thinking the moratorium stops all claims against the company, or that a winding up can start with the administrator's consent
The word suggests a total freeze, and students lump every creditor action under one consent rule.
Fix: No winding-up order can be made and no resolution passed while the company is in administration, apart from limited exceptions such as public interest petitions. Administrator consent or court permission is needed only for enforcing security, repossessing goods and legal proceedings.
Believing the administrator works for the directors or shareholders
Directors usually run the company, so students assume loyalty follows them.
Fix: The administrator acts as agent of the company but must perform functions in the interests of creditors as a whole.
Forgetting that the administrator must be a licensed insolvency practitioner
Students focus on who appoints and ignore who can be appointed.
Fix: Whenever an appointment question appears, check the qualification of the appointee as well as the route.
Assuming directors are removed automatically
Students confuse administration with liquidation, where directors' powers largely end.
Fix: Directors stay in office but may not exercise powers that would interfere with the administrator's functions, unless the administrator consents.

Worked examples

Example 1

Zeta Ltd cannot pay its debts, but its business is profitable if it can avoid immediate creditor pressure. A bank with a floating charge over all its assets is considering action. Which process is most suitable, and what are the administrator's purposes in order?

Show the solution

The company has a viable business and needs breathing space. This points to administration, not liquidation.
The floating charge holder can appoint an administrator, so the bank is one possible route into the process.
Purpose one: rescue Zeta Ltd as a going concern. The administrator must perform for this purpose unless it is not reasonably practicable or the second purpose would achieve a better result for creditors as a whole.
Purpose two: achieve a better result for creditors as a whole than liquidation would.
Purpose three, only if neither of the first two is reasonably practicable: realise property to make a distribution to one or more secured or preferential creditors, without unnecessarily harming creditors as a whole.

Answer: Administration is suitable. The administrator must pursue rescue unless it is not reasonably practicable or a better result for creditors as a whole can be achieved, in which case the aim is that better result. Realising assets for secured or preferential creditors applies only if neither is reasonably practicable.

Example 2

Omega Ltd is in administration. A supplier who sold goods to Omega on credit wants to start court proceedings to recover the debt, and a finance company that supplied equipment to Omega under a hire purchase agreement wants to repossess it. Can they proceed?

Show the solution

Identify the process: Omega is in administration, so a moratorium applies.
The supplier's court action is legal proceedings against the company. The moratorium restricts this.
The finance company's repossession of the goods held under the hire purchase agreement is also restricted by the moratorium.
Neither may proceed unless the administrator consents or the court gives permission.
The reason is to protect the business so the administrator can pursue the statutory purposes.

Answer: Neither can proceed without the administrator's consent or the court's permission, because the moratorium restricts legal proceedings and repossession.

Exam tips

Learn the three purposes as a ladder, with the exceptions. Questions often test the order and the conditions for moving down, not just the list.
Contrast administration with liquidation. Many wrong options are describing liquidation.
For appointment, name the three routes in general terms: court, floating charge holder, and company or directors.
In moratorium questions, separate the actions. Winding-up orders and resolutions are barred (apart from limited exceptions such as public interest petitions). Enforcing security, repossessing goods and legal proceedings need consent or permission.
Remember Section A and B questions are all or nothing, so read every option fully before choosing.

Practice questions from Insolvency and administration

Administration and Administrators: frequently asked questions

What is administration in company law?

Administration is a formal insolvency process in which a licensed insolvency practitioner takes control of a distressed company. A moratorium protects it from most creditor action. The aim is to rescue the company or get a better result for creditors than liquidation.

What is the difference between administration and liquidation?

In administration the company continues and the aim is rescue or a better return for creditors. In liquidation the company is wound up, its assets are sold and it is then removed from the register. Administration can end in liquidation, but it does not have to.

How is an administrator appointed?

An administrator can be appointed by a court order, by the holder of a qualifying floating charge, or by the company or its directors. In every case the administrator must be a licensed insolvency practitioner.

What does the moratorium do in administration?

While the company is in administration, no winding-up order can be made and no resolution passed to wind it up, apart from limited exceptions such as public interest petitions. Creditors also need the administrator's consent or the court's permission to enforce security, repossess goods or bring legal proceedings. This gives the administrator time to pursue the purposes of administration.