Administration
You'll learn what administration is, why companies enter it, and how it differs from liquidation. This lesson covers the legal framework that gives struggling companies a 12-month breathing space to restructure, the powers and duties of administrators, and the key conditions for starting and ending administration.
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In this lesson
- 0:00 Introduction to administration and rescue
- 0:25 Who can initiate administration proceedings
- 1:22 Effects and protections of administration
- 2:12 Administrator's powers and fiduciary duties
- 3:36 Administrator's legal duties and obligations
- 4:31 How administration ends or transitions
- 6:15 Transactions under value and creditor preferences
- 8:01 Exam question: voluntary liquidation types
About this lesson
You'll also explore related insolvency concepts like transactions at undervalue and preferential creditor payments, with worked examples to help you apply these concepts in exam questions. Administration is a formal insolvency procedure triggered by the court, a floating charge holder, or company directors when a business faces financial difficulty. The primary aim is to rescue the company as a going concern and achieve a better outcome for creditors than immediate liquidation would allow. During the 12-month moratorium period, creditors' rights are suspended, applications for liquidation are dismissed, and the appointed administrator—who acts with fiduciary duty—takes control to run the business, negotiate payment plans, and potentially turn the company around. The administrator has broad powers to continue trading, remove directors and employees, and make payments to preferential creditors (or unsecured creditors with court approval). They must give notice of appointment, request a creditors' meeting within ten weeks to present proposals, and investigate any fraudulent or wrongful trading. Administration ends successfully when an agreed payment plan is established and the company stabilises, or it can be extended beyond 12 months if creditors and the court agree. If administration fails or was initiated with improper motives, the company moves into liquidation. Understanding administration is essential for insolvency law questions in your qualification, particularly when distinguishing between different insolvency procedures and recognising the rights and duties of key parties involved in rescuing an insolvent company.
Duration: 9m
Transcript
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