Company administration aims to avoid liquidation and keep a business running while also achieving the best deal possible for creditors.
When companies get into financial difficulties, it can leave suppliers who are owed money in a tricky situation. As the saying goes, you can’t get blood out of a stone.
Experienced debt recovery professionals know how to maximize your chances of getting paid.
If one of your clients has mentioned ‘going into administration’ this guide will help you with the next steps.
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Table of Contents
What Does “Going Into Administration” Mean?
Going into administration means that the company is entering the administration process. Administration can be entered by company directors voluntarily, or it can be ordered by a court, usually following an application by creditors.
Once administration has been entered, a business is protected from any further action to recover debts, such as a winding-up petition. However, control of the company is taken out of its directors’ hands.
When a company goes into administration, a qualified insolvency practitioner is appointed as administrator to manage the business and resolve its outstanding debts. On Companies House, you will see the date the administrator was appointed.
What Causes Companies to Go Into Administration?
There will be two signs that a company may be on a path to administration:
- Cash flow problems: When a business doesn’t have ready money available to pay its debts on time. This is often temporary and can be resolved.
- Insolvency: When it can no longer pay its debts as they fall due or when its liabilities exceed its assets. At this point, the company may enter a formal insolvency procedure.
Once a company is insolvent, there are various procedures a company could go through:
- Company Voluntary Arrangement (CVAs): The company proposes a payment plan to creditors, typically spreading debts over 3-5 years. The company continues trading while making agreed payments.
- Company Administration: An insolvency practitioner (administrator) takes control of the company to do one of three things: rescue it as a going concern, achieve better results for creditors than immediate closure, or realize assets to pay secured creditors. The company continues trading during administration.
- Liquidation: The company is wound up, and its assets are sold to pay creditors. Liquidation can be compulsory (forced by creditors through court) or a creditors’ voluntary liquidation (directors initiate it when the company is insolvent). Once liquidation begins, the company stops trading, and you’ll need to submit proof of debt to claim any money owed.
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How Company Administration Works
Once a company goes into administration, the administrator’s first task is to assess how viable the company is as a going concern. This includes evaluating all relevant aspects, such as:
- Turnover
- Profitability
- Debt burden
- Number of employees
- Contracts with suppliers and clients
- Market value
Once this stage has been completed, the administrator must form a plan for settling outstanding debts and bringing the company out of administration. This may involve any combination of:
- Restructuring
- Finding a buyer to invest
- Selling off assets or liquidation.
Some procedures, known as Pre-Packaged Administrations, see the sale of a company or its assets agreed upon before administration is entered, fast-tracking the whole process.
What Does Administration Mean for Creditors?
Administration is intended to strike a fair balance between the needs of struggling companies and creditors.
If a client who owes you money goes into administration, you will be notified by the administrator. The most immediate effect this will have is that any legal proceedings related to debt recovery efforts will cease, and you will not be able to launch more.
However, the administrator is obliged to achieve the best possible outcome for creditors. They will write to you within 8 weeks outlining their proposed course of action, whether this involves sale of assets, restructuring, sale, or closure.
They may also recommend entering a CVA and invite you to start negotiations.
Ultimately, there is no guarantee that you will be able to recover the full value of your debts from a company in administration. But this also applies to liquidation – if the value of a company’s assets does not match its debt burden, creditors will not get all of their money back.
The advantage of administration is that it looks at all available options before closure and puts a trained professional in charge whose job is to get the best deal possible for everyone.
What Are the Warning Signs Your Client May Be Going Into Administration?
Spotting problems early gives you time to protect your position. In our experience, there are often warning signs that administration may be coming, and we have a list of late payment red flags you can read.
In particular, look for:
Payment changes. When a client starts to miss payment deadlines and debts mount up, it is natural to start to wonder – do they have the means to pay? Look out for:
- Late payments or unpaid invoices
- Persistent payment problems and mounting debts
- Requests to vary payment terms, like extending deadlines asking to pay in installments
- Cheques bouncing or direct debits failing
- Only paying enough to keep the account just within credit terms
Communication changes. Clients with cash flow problems may become evasive, ignoring late payment letters and avoiding phone calls. You may notice:
- Key contacts becoming difficult to reach
- Vague explanations about payment delays
- Promises to pay that aren’t kept
- Finance director or other senior staff departing suddenly
Operational signs: A company that is heading into administration may begin to scale down its orders. Watch out for:
- Reduced order volumes or cancelling regular orders
- Requesting smaller deliveries than normal
- Staff redundancies or office closures
- Suppliers or contractors visibly stopping work at their premises
Company information: Keep an eye on the client’s business credit report and follow the company on Companies House.
You can also set up a Google Alert on the company name.
You should look for:
- County Court Judgments (CCJs) appearing on their credit file
- Overdue accounts filed at Companies House or accounts showing losses
- Changes in directors, particularly the appointment of turnaround specialists
- Winding-up petitions published in The Gazette
What Should You Do If You Spot Signs of a Client Entering Administration?
If you find out that one of your clients is entering administration, reach out to a debt recovery agency as quickly as possible.
We understand insolvency procedures, know how to communicate effectively with administrators, and can often spot recovery opportunities you might miss.
Early advice – even just a conversation about your options – can make a significant difference to what you ultimately recover.
In the first 24-48 hours, you should also:
- Check what you’re owed – Gather your invoices, delivery notes, contracts, and correspondence. Calculate the exact amount you’re owed using our free late payment calculator.
- Stop supplying – Unless you are a supplier of essential supplies, that is to say a supplier of services specifically listed in sections 233 and 372 of the Insolvency Act 1986 you’re under no obligation to continue providing goods or services once administration begins. You should only continue if the administrator specifically requests it and agrees to pay further fees directly.
Managing some of these processes requires specialist knowledge. We can assess whether any alternative routes are worth pursuing in your specific situation.
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Frequently Asked Questions on Company Administration
Will I get paid if a company that owes me money goes into administration?
Not necessarily in full, but you are entitled to submit a claim.
When a company enters administration, the administrator is legally obliged to write to all known creditors within eight weeks, outlining their proposed course of action.
You will be asked to submit a proof of debt.
Whether you receive payment (and how much) depends on the value of the company’s assets relative to its total debts, and where you sit in the order of priority. Secured creditors (those with a charge over company assets) are paid first, followed by preferential creditors such as employees. Unsecured trade creditors, which most suppliers fall into, are paid last.
In practice, unsecured creditors often recover a fraction of what they are owed, or nothing at all.
Acting quickly and taking professional advice as soon as you hear a client may be entering administration gives you the best chance of recovering as much as possible.
Does a company in administration still owe me money?
Yes. The debt does not disappear when a company enters administration.
However, your ability to pursue it through normal legal channels is suspended for the duration of the administration process. You cannot issue a winding-up petition or take other recovery action while the administration moratorium is in place. Your recourse is to register as a creditor and work through the administrator.
If a company in administration owes me money, do I have to keep supplying them?
No, unless you are a supplier of essential services. For most trade suppliers, you are under no obligation to continue providing goods or services once administration begins. You should only continue if the administrator formally requests it and agrees in writing to pay for any further supplies directly.
What does an administrator do?
An administrator is a licensed insolvency practitioner appointed to take control of a company that has entered administration. Their primary duties are to try to rescue the company as a going concern, or if that is not possible, to achieve a better outcome for creditors than immediate liquidation would produce. They assess the company’s finances, manage its operations during the process, communicate with creditors, and either restructure the business, arrange a sale, or wind it down in an orderly way.
How long can a company be in administration?
Administration initially lasts for 12 months, but this can be extended with the consent of creditors or by court order.
In practice, many administrations are resolved within the initial 12-month period, either through a sale of the business, a restructuring, or a move into liquidation. Complex cases involving large companies or contested claims can run longer.
Can a company survive administration?
Yes. Administration is specifically designed to give a struggling company breathing space to restructure or find a buyer, rather than going straight to liquidation.
Some companies emerge from administration under new ownership or with a restructured debt burden and continue trading. Others are sold as a going concern through a pre-packaged administration, where a buyer is lined up before the process formally begins.
However, not all administrations result in survival. Some lead to liquidation if no viable rescue option exists.
What happens after administration ends?
There are three possible outcomes:
- The company may be rescued as a going concern and return to normal trading, either under existing or new ownership.
- It may enter a Company Voluntary Arrangement (CVA), continuing to trade while repaying creditors under an agreed schedule.
- It may move into liquidation, where its remaining assets are sold and the proceeds distributed to creditors before the company is dissolved.
How do I find out if a company is in administration?
The most reliable method is to search for the company on Companies House, where the appointment of an administrator will be recorded.
You can also:
- Check The Gazette, the official public record, where notices of administration are published
- Check the company’s credit report
Setting up a Google Alert for the company name is a useful early warning tool.
If you are a creditor, the administrator is legally required to notify you directly once appointed.
Why do companies go into administration?
The most common causes are cash flow problems (where a business cannot pay its debts as they fall due) and insolvency (where liabilities exceed assets.)
Trading losses, over-reliance on a single large customer, rising costs, loss of a major contract, or accumulated debt can all contribute.
Administration is sometimes a planned step by directors who recognise the company cannot continue without restructuring, and sometimes it is triggered by creditor action such as a winding-up petition.
If a company in administration owes me money, do I still owe them anything?
This is an area where you should take professional advice rather than acting unilaterally.
You should not simply offset what you owe against what you are owed without the administrator’s agreement. The administrator will contact you about any outstanding amounts owed to the company, and the correct approach is to engage with that process rather than withhold payment independently.
What NOT to Do If You Spot Signs of a Client Entering Administration
If your client is entering administration, don’t expect quick answers from the administrator. Don’t offset debts or take back any goods.
Additionally, don’t rush into an agreement with a debt collection agency. Read our guide to the hidden risks in some no-win, no fee debt collection services.
Instead, contact Safe Collections immediately for a free review of your claim. Since 1984, we’ve been successfully collecting unpaid debts for businesses in the UK and have 10,000+ satisfied clients.
