Administration was introduced by the Insolvency Act 1986 as a procedure aimed at rescuing companies in financial difficulties.

When a company is facing financial difficulties it can be placed into administration. This means that the affairs, business and property of the company will be managed by a person appointed for that purpose.

A company may be placed into administration:

• By a court Order of the Court, on application by amongst others, the company, its directors, one or more creditors or, if it is in liquidation, its Liquidator;
• Without a Court Order, by the direct appointment of an Administrator by the company, its directors or a creditor who holds comprehensive security of a type which qualifies him to make such an appointment.

The Administrator must perform his functions with the objective of:

• Rescuing the company as a going concern, or
• 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
• Realising property in order to make a distribution to one or more secured or preferential creditors.

The Administrator must be perform his or her functions with the first of these objectives unless he or she thinks either:

• that it is not reasonably practicable to achieve that objective, or
• that the second objective would achieve a better result for the company's creditors as a whole.

The Administrator may perform these functions with the third objective only if:

• It is thought that it is not reasonably practicable to achieve either of the first two objectives, and
• It is not likely to harm the interests of the creditors of the company as a whole.

Once the order has been granted a moratorium is put in place to protect the company from creditors who may seek to recover any assets without leave of the Court or the Administrator.

The Administrator has wide powers to run the company whilst he prepares his proposals for achieving the purpose for which Administration has been granted.

Administration may lead to the survival of the company when control can be eventually handed back to the directors.