When you hear that a company has gone into administration, it can feel like an instant full stop. For directors it can be frightening and confusing. For employees, customers and suppliers it raises immediate questions about jobs, orders, payment and continuity.
Administration is not automatically the end of the road. In England and Wales, it is a formal insolvency process designed to protect a company while a licensed insolvency practitioner, the administrator, takes control and works toward a statutory outcome. In many cases it is used to rescue the business, sell it, or achieve a better result for creditors than an immediate liquidation would deliver.
This guide explains what administration is, what typically happens, and the practical steps you should take if your business, or a company you deal with, is entering administration.
What does it mean when a company enters administration
Administration is a legal process under the Insolvency Act 1986 where an administrator is appointed to manage the company’s affairs, business and property. One of the defining features is that control shifts away from the directors to the administrator, who must act in the interests of creditors as a whole and pursue statutory objectives.
The administrator’s objectives are set out in law. In simple terms, they are:
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Rescue the company as a going concern, or if that is not reasonably practicable
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Achieve a better result for the company’s creditors as a whole than would be likely if the company were wound up without first being in administration, or if that is not reasonably practicable
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Realise property to make a distribution to secured or preferential creditors
Administration also triggers a statutory moratorium, meaning most creditor enforcement and legal actions are paused without permission. This gives breathing space for a restructure or sale plan, rather than a disorderly race by creditors.
Administrators can be appointed by the court, or in many cases through an out of court route by the company, directors, or a qualifying floating charge holder. Government guidance confirms that, for certain appointment routes, the appointment takes effect when the required notice and prescribed documents are filed at court in line with the Insolvency Rules.
What typically happens after an administrator is appointed
Once appointed, the administrator will quickly assess whether the business can keep trading, what funding is available, and whether a sale or restructure is achievable. You may see one of these common outcomes.
A business sale, sometimes very quickly. A sale can happen as a going concern, preserving jobs and contracts where possible, or as an asset sale.
A restructure with continued trading. The administrator may reduce costs, close unprofitable sites, renegotiate terms and seek new investment.
A move toward liquidation. If rescue is not achievable, the administrator may stop trading and realise assets for creditors.
For employees, administration does not automatically mean everyone is dismissed, but redundancies can happen. For customers and suppliers, it may mean contracts are reviewed and trading terms change. For creditors, it means claims are handled through the insolvency process rather than by individual enforcement.
The moratorium is a key reason administrators can stabilise a business. It pauses many forms of action, but it does not guarantee payment and it does not mean the company is healthy. It is a window to act, not a cure.
What directors should do if your company is heading into administration
If you are a director, the best outcomes usually come from early action. Waiting until there is no cash, no stock, and no confidence in the market reduces the options available.
These are the immediate priorities.
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Get an accurate view of cash flow, liabilities, and who is being paid and why
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Preserve records and management information, including contracts, leases, payroll, and tax filings
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Stop making assumptions about what you can and cannot pay, and avoid preferential decisions
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Speak to a licensed insolvency practitioner early to understand whether administration is appropriate, or whether an alternative process fits better
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Communicate carefully with key stakeholders, especially lenders and critical suppliers, to reduce panic and stabilise operations
That is the only bullet list in this article, and it is deliberately practical. If you take only one message from this page, take this: administration is a legal process with strict duties and timelines. The earlier you obtain advice, the more control you retain over outcomes.
What creditors, suppliers, customers and employees should do
If you are dealing with a company that has gone into administration, your focus should be on protecting your position and making decisions based on verified information.
Creditors and suppliers should identify the administrator and request details of the claims process. Consider whether you can reclaim goods if title has been retained, and whether you should continue supplying, and if so, on what terms. In many cases, continued supply may be requested because it supports a sale or rescue, but it is vital to agree payment terms that reflect the new risk profile.
Customers should check whether the company is still trading and whether orders will be fulfilled. Do not rely on assumptions. If you have paid deposits or prepayments, gather invoices and proof of payment so you can submit a claim if needed.
Employees should look for official communications from the administrator regarding trading status, payroll, and next steps. If redundancies are proposed, the administrator will explain the process and what information employees need to provide. Keep copies of contracts, payslips, and any correspondence.
Across all stakeholder groups, one principle holds. Administration is structured. The administrator must communicate proposals and updates, and you should use those formal channels rather than acting on rumours.
Speak to Penerley today
If your business is under pressure, or you have been impacted by a customer or supplier entering administration, getting the right advice early can make a measurable difference. The decisions made in the first few days can affect rescue prospects, asset value, creditor returns, and director risk.
Penerley can help you understand your options, assess whether administration is the right route, and plan the next steps with speed and clarity. Contact our team today to arrange a confidential discussion and get a clear, practical action plan for the next 48 hours.
