Administration

Administration is governed by Schedule B1 to the Insolvency Act 1986, inserted by the Enterprise Act 2002. The administrator's objectives are set out in a strict hierarchy: rescuing the company as a going concern is the primary aim, and the administrator must pursue it unless it is not reasonably practicable or unless achieving a better result for creditors as a whole would be preferable. Only if neither of those is achievable may the administrator fall back on the third objective of realising property to distribute to secured or preferential creditors, and even then only without unnecessarily harming the interests of creditors as a whole. An administration order is simply "an order appointing a person as the administrator of a company", and administrators can also be appointed out of court by the holder of a qualifying floating charge, by the company, or by its directors.

The defining practical feature of administration is the statutory moratorium in paragraph 43 of Schedule B1, which freezes creditor action for the duration of the process. While a company is in administration, no step may be taken to enforce security over its property, repossess goods held under hire-purchase, exercise a landlord's right of forfeiture by peaceable re-entry, or institute or continue legal proceedings against the company — in each case unless the administrator consents or the court gives permission. An administrative receiver cannot be appointed once administration begins. This breathing space is what allows an administrator (who must be a licensed insolvency practitioner) to trade the business, negotiate with creditors, or run a sale process without the company being dismembered by individual creditor enforcement action.