Time scale of company administration

Administration is a temporary state for a company. Sooner or later, it will need to exit administration and the safeguards it provides. Exiting administration can happen through various means, including a sale to a connected or unconnected party, entering an alternative recovery process like a CVL, or even liquidation if rescuing the company is deemed impossible.


What happens when a company is in administration?

When a business faces significant financial distress, it may be advisable to place the company into administration. Company administration is a potent form of corporate insolvency procedure that provides a struggling business with the time and space to improve its financial situation.

Administration is not a solution by itself, and it is not a permanent state for a company. Instead, it acts as a ‘holding’ stage while a more definite plan for the future is developed. Once a company enters administration, it benefits from legal protection in the form of a moratorium. This shields the company from creditors initiating legal proceedings to recover money owed.

With the threat of litigation removed, the company can devise a practical plan and make informed decisions about its future direction.


The function of the administrator

When a company enters administration, control of the business is transferred to the appointed administrator, who must be a licensed insolvency practitioner. The administrator collaborates with the company’s shareholders and creditors to assess the company’s future prospects as a viable trading entity.

In the short term, the company might be permitted to continue trading during administration; alternatively, it may be determined that ceasing trade is the more suitable option to safeguard creditors from additional losses. This evaluation is done on a case-by-case basis by the appointed administrator.


How long can a company stay in administration?

There is no set time limit, either upper or lower, determining how long a company can stay in administration. In company insolvency, each case varies, and the extent of the problems, along with the company’s desire and future viability, will determine the level of professional involvement needed.

Administrations usually don’t extend beyond 12 months, but in cases where more time is necessary, it is often permitted as long as the administrator can justify the need to achieve the best outcome for the company and its creditors.

While the duration of a company’s administration may not be particularly crucial, what holds significance is that the administration fulfils one of the three statutory purposes outlined in the Insolvency Act 1986. These are:

  • Rescuing the company as a going concern, or
  • Achieving a better outcome for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration), or
  • Realising property to make a distribution to one or more secured or preferential creditors.

Once one of these objectives is met, the company exits administration through an appropriate route.

This may involve the company continuing to trade, operating under an alternative insolvency procedure like a CVA, or ceasing trade entirely before entering a formal liquidation process.

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Considering administration?

If your company is under financial pressure and you’re contemplating voluntary administration, seek professional advice at the earliest opportunity.

With over 100 offices nationwide, Vanguard Insolvency is well-positioned to assist. Schedule a free consultation with a licensed insolvency practitioner to determine the most suitable next step for your business, which might involve company administration.

Call today to talk to a member of our expert team.

Senior Partner at Vanguard Insolvency Practitioners | Website | + posts

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.