What is an Administration Order? - Definition & Source of law - Benefits & implications

Effects of an Administrators Appointment

Where is the relevant insolvency law found to answer the question "what is an administration order"?

An Administration is an insolvency process now governed by the law as set out in Schedule B1 and Schedule 1 of The Insolvency Act 1986. The Insolvency Act became law, as far as this topic is concerned, on the 15th September 2003.

The main defining effect of an Insolvency Administration Order is that:

"It freezes creditors actions."

By that is meant that on the onset of an Administrator's appointment then:

• landlords cannot distrain on your company's assets

• creditors cannot pursue court judgments against your company

• winding up petitions cannot be issued against your business

• bailiffs cannot seize assets or take "walking possession"

• H P companies cannot recover their assets

That "freeze" on creditors enforcement procedures provided by the Administrator's appointment gives directors the time needed to consider alternatives and to put a rescue plan in place. The process is, therefore, quite often an interim step to achieve a later objective such as a company voluntary arrangement.

In many instances an Administration can, however, stand on its own without necessarily there being a later insolvency process.

An administrator has a very wide range of powers including the right to dismiss directors! Take care and work out a strategy if you are considering making such an appointment to your company. So ensure that you have comprehensive and free insolvency advice to ensure that you really understand administration before considering the pros and cons of making an appointment.