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Can Administration Stop my Business from Entering Liquidation?

Yes it can. Often administration (which is a Court order) is used to stop a liquidation process to give more time for a business to be saved or restructured. It can be used by limited companies and partnerships, but not sole traders.

Administration is a very powerful tool and can be used when a company is in debt and cannot see a way out. It is also a very fast process and a company can be put into administration within 24 hours.

It is often used by banks when they call in a loan if they have a debenture on the business. In this case they will quickly appoint an administrator to try and preserve the assets so the bank can be repaid.

Administration does not suit every situation, but it is very effective where there are substantial assets that need to be protected and secured, or if there is value and jobs to be rescued from trying to sell the business.

This may even mean that the business is sold back to the existing management/directors or a third party who has been in the wings before administration. Sometimes a pre-pack administration is used in this process, and this is a name given if the buyer was lined up beforehand.

Often administration is used to stop a liquidation process to give more time for a business to be saved or restructured.

Even after administration, a business can still go into liquidation. This usually happens within 12 months and occurs due to the way the law is written – its unsecured creditors’ claims can only be agreed and paid out by a liquidator.

A Word of Advice

If the bank hold a debenture and you want to put the company into administration you will need to give the bank five clear working days’ notice before you do so. They may decide to appoint their own administrator. You can check to see if the bank or any lender has a debenture by looking at Companies House under “mortgage index” for your company.


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