An Administrator is appointed when a company is insolvent or at risk of going into insolvency. The process of going into administration can be started by the directors of the company or by a creditor applying to the Court. The directors may be advised and assisted in this process by an Insolvency Practitioner. A person appointed as an Administrator must be a Licensed Insolvency Practitioner.
Once an Administrator has been appointed he takes on the responsibility for the affairs, business and property of the company in place of the directors. The Administrator's role is to either re-structure the business to return it to profitability or to produce a more beneficial result for the business’ creditors than would have been reached through a straightforward liquidation process. Where companies can be saved they should be saved.
An Administrator of a company has the powers to dismiss directors, managers and employees, close sites, negotiate the sale of the business and work with creditors on re-structuring proposals. While a company is in administration a creditor cannot take action to recover his debts from the company without the agreement of the Administrator or the Court.
An Administration is limited to a year except in circumstances where there is consent from the creditors/and or the Court. Only when it becomes clear that a re-structuring of the business or continuing to trade and selling the business as a going concern will not work will the Administrator dispose of the company’s assets.
Usually the company will come out of administration and move into liquidation and the liquidator can then pay a dividend to creditors