Difference between administration and winding up

We set out below some of the key differences between administration and winding up.

Administration

Administration is a company administration process brought by an insolvent company, its directors or creditors, often used by a business in financial difficulties in order to rescue the parts of the business that are viable as a going concern, and to achieve a better result for the company’s creditors overall than if the company ceased to trade and was wound up.

An administration order is a company administration procedure which leads to company administration and one of the key advantages is that it provides a moratorium from legal proceedings being brought against the firm in administration while the administration order is in place.

The company administration procedure means that the business under administration is dealt with by an independent administrator who will handle creditors who say that a company in administration owes me money and will be able to effect an orderly outcome for the company under administration.

Putting a firm in administration (or going into administration) can allow for some breathing space from immediate creditor pressure. This may be by way of a pre-pack administration sale to allow someone buying a company in administration to purchase the viable parts of the business under administration, which can have the added benefit of saving jobs and allowing a firm in administration to continue in some form.

Winding up order

A winding up order is a company insolvency procedure that can be brought either by creditors or directors. It is often used where there is no viable business to sell in order to end the company in an orderly manner. Unlike a company administration it is unlikely that there will be a sale of the business by way of a pre-pack administration sale for example. The liquidator in a winding up collects in the assets of the company and will distribute these on a specified priority basis to creditors.

The liquidator of the insolvent company will also investigate any issues within the company including any breach of directors’ duties, which may lead to director disqualification or other remedies in order to recoup assets back into the company insolvency for the benefit of all creditors.

Contact the expert insolvency lawyers today

If you are considering putting a company into administration or a winding up it is vital that you take expert legal advice to decide which is the best option for you and your company. Our team of experts at Francis Wilks and Jones frequently deal with both forms of company insolvency procedure and are able to provide detailed advice on whether going into administration is better for a company with insolvency issues than winding up.