Administration (Insolvency)

Schedule B1 to the Insolvency Act 1986 sets out the administrator's objectives as a strict hierarchy rather than a free choice between equally weighted options. The administrator 'must perform his functions with the objective of' first 'rescuing the company as a going concern, or' second 'achieving a better result for the company's creditors as a whole than would be likely if the company were wound up (without first being in administration), or' only as a last resort 'realising property in order to make a distribution to one or more secured or preferential creditors.' The rescue objective is meant to be pursued unless the administrator judges it is not reasonably practicable, and the fall-back distribution objective is only available where neither of the first two is achievable.

What makes administration attractive compared with an ordinary winding up is the protection it gives the company from its creditors while the administrator works towards one of those objectives. Once a company is in administration, Schedule B1 imposes a moratorium on other legal process: 'No step may be taken to enforce security over the company's property except' with the administrator's consent or the court's permission, and more broadly 'No legal process (including legal proceedings, execution, distress and diligence) may be instituted or continued against the company or property of the company except' on the same basis. That breathing space is what allows the administrator to try to trade the company out of difficulty, or organise an orderly sale of its business, without creditors racing each other to the courthouse door.