House of Commons Library

Company administration

Published Tuesday, April 12, 2016

This note provides an outline of the main characteristics and objectives of the administration process (including pre-pack administration) and the steps involved in order to put a company into administration. It also highlights why, in certain circumstances, administration can be an important company rescue insolvency procedure.

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Insolvency arises when individuals or businesses have insufficient assets to cover their debts, or are unable to pay their debts as and when they fall due.

Administration is a legal process. At its heart, it is a company rescue procedure. When an administration order is in place, a moratorium protects the company from legal actions, whilst a survival plan or an orderly wind down of the company’s affairs is being achieved. The administration procedure has been extensively reformed since the Enterprise Act 2002 came into force in September 2003, with the aim of making it a more efficient process. 

In recent years, company administrations (in particular ‘pre-packs) have been in the ‘limelight’ due to the large number of high-profile administrations on the high street. This Commons briefing paper provides an outline of the main characteristics and objectives of the administration process, including ‘pre-packaged administrations’, and the distinctive role of the Administrator. It also highlights why, in certain circumstances, administration can be an important company rescue insolvency procedure. This paper applies to England, Wales and Scotland.

Commons Briefing papers SN04915

Author: Lorraine Conway

Topic: Insolvency

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