Trading through Administration — the operational framework

• ›Going-concern value preservation — most SME businesses are worth materially more as ongoing operations than as broken-up assets. Customer relationships, contracts, workforce and goodwill have real value only if trading continues.
• ›Sale preparation — administration sales (pre-pack or open-market) achieve substantially better outcomes for ongoing businesses than for ceased ones. Buyers pay more for a working operation.
• ›Statutory purpose — Sch.B1 para.3 IA 1986 sets out the administration objectives: rescue the company as a going concern; achieve a better result for creditors than on a winding up; realise property to make distribution. Trading is the principal mechanism for the first two.

The administrator has comprehensive operational authority:

• ›Power to carry on the business of the company (para.67) — the principal trading authority.
• ›Power to manage all property of the company — including disposal where appropriate.
• ›Power to enter into contracts on behalf of the company — new supply, customer contracts, employment terms.
• ›Power to bring or defend legal proceedings.
• ›Power to grant security over company property.
• ›Power to borrow — including on terms giving the lender priority over existing creditors.
• ›Power to dispose of property subject to fixed charge (paras.70–71) — with consent or Court order.

Directors’ powers are displaced under paragraph 64. Directors cannot exercise any management powers without administrator consent. They retain office (and statutory directors’ duties) but operational control sits with the administrator.

The administration moratorium prevents creditor self-help during the procedure:

• ›No resolution or order for winding up may be made.
• ›No steps to enforce security over the company’s property without administrator consent or Court permission.
• ›No steps to repossess goods under HP / leasing without administrator consent or Court permission.
• ›No landlord forfeiture or re-entry without administrator consent or Court permission.
• ›No legal process (proceedings, execution, distress) without administrator consent or Court permission.

The moratorium gives the administrator time and space to trade, prepare sales, and execute the rescue or value-preservation strategy.

Suppliers face a binary choice when a company they supply enters administration:

• ›Continue supplying — on cash-with-order or short-term terms agreed with the administrator. The administrator typically becomes the creditor (rather than the company) for post-appointment supplies.
• ›Cease supplying — and rank as unsecured creditor for the pre-appointment debt.

Important statutory protection — s.233A and s.233B IA 1986 (introduced by the Corporate Insolvency and Governance Act 2020) prohibit ‘ipso facto’ termination clauses. A supplier cannot terminate a contract solely because the company has entered an insolvency procedure. Some essential suppliers (utilities, telecoms, IT) have specific statutory protections under s.233 IA 1986 — they cannot demand satisfaction of pre-appointment debt as condition of continuing supply.

• ›Existing orders — the administrator decides whether to perform or repudiate. Profitable contracts typically performed; loss-making ones may be repudiated (customer ranks as unsecured creditor for damages).
• ›New orders — taken on commercial terms by the administrator. Often customer is asked to pay in advance or on shortened payment terms during administration.
• ›Customer deposits / pre-payments — held by the company pre-appointment rank as unsecured creditors. Post-appointment deposits typically held in administrator’s client account.
• ›Warranty obligations — depend on whether the warranties were given before or after appointment, and whether the business is sold (warranties may transfer).

• ›First 14 days — administrator can dismiss employees without ‘adopting’ their contracts. No personal liability for the administrator for arrears.
• ›After 14 days — employment contracts are deemed adopted. The administrator is personally liable for ongoing wages (typically reimbursed from realisations).
• ›Sale of business — employees transfer under TUPE 2006 to the buyer. See the TUPE in insolvency article.
• ›Redundancy — if the administrator cannot continue employment, redundancy follows. Statutory redundancy claims to RPS where the company cannot pay.

Schedule B1 paragraph 76 sets a default 12-month duration for administration, extendable by 12 months with creditor consent or Court order. The duration card above shows the four typical patterns. Most administrations exit via: (a) sale of business + CVL or dissolution of the remaining company; (b) CVA approval and exit from administration; (c) CVL or dissolution where no sale or restructuring is achieved.

• ›Customer collections — the principal cash source; the administrator typically chases debtors aggressively.
• ›Asset sales — excess stock, surplus equipment, redundant property may be realised to fund trading.
• ›Administrator’s borrowing — on terms giving the lender super-priority (ranks ahead of pre-appointment secured creditors).
• ›Connected party funding — in some rescues, the eventual buyer or refinancer funds the trading period.

Administrators avoid loss-making trading. Where trading is loss-making and no rescue or sale prospect exists, the administrator will cease trading and proceed to wind-down.

For the broader Administration framework, see Administration pillar. For the NOI procedure used to enter administration, see Notice of Intention to Appoint Administrators. For employee transfers during administration sales, see TUPE in insolvency. For pre-pack administration as the principal alternative, see Pre-pack administration explained.