HomeFWJ TakeawayCompany rescueBusiness recovery and rescueWhat happens following an insolvency administration order?

In company administration, the company administration procedure is to apply for an insolvency administration order.

An independent administrator will then be appointed who will act as an agent for the company and will take over the running of the company under administration.

  • the administrator’s role is to achieve one of the purposes of the administration set out under insolvency legislation, and in doing so he acts for all creditors.
  • putting a company into administration is a company insolvency process designed primarily to rescue some or all of the firm in administration.
  • it provides for an immediate moratorium on legal proceedings against the company, giving the business under administration some breathing space in which to allow for a sale or a restructuring without the threat of creditor intervention.
  • it is designed to achieve a better outcome for all creditors than alternative company insolvency procedures. Administration orders can therefore be highly beneficial.

If it is going to provide a better return for creditors it is possible that the administrator will continue to trade the company in administration for a period of time. Generally, this will be beneficial to rescue some or all of the viable parts of the business under administration and will often be by way of a pre-pack administration sale or a post-administration sale of the business under administration.

Trading with a company in a formal company insolvency process, such as a company administration, can have the effect of changing the relationship between the company and the supplier or creditor. They must liaise with the administrator rather than the directors and while a creditor will often complain that a company in administration owes me money, if they agree to supply a business under administration on an on-going basis then they may be able to be agree quicker repayment than if the business under administration was in an alternative more permanent procedure.

If you are a director considering putting a company into administration and you are concerned about whether you can continue to trade, it is essential to take legal advice as early as possible so that you act within the law and don’t expose yourself to potential personal liability during the company insolvency process. Similarly, if you say that a company in administration owes me money, we can advise you if you wish to continue trading with the firm in administration on the best way to optimise the chances of recovery of debts owed. Our team of experts at Francis Wilks & Jones have years of experience in advising directors and creditors in these situations.

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