Administration is a rescue mechanism for insolvent companies, which allows you to continue trading while your business is operated by an interim Chief Executive on behalf of your creditors. This can buy time to consider your options or restructure your company.
The administration procedure can be used as a form of protection, in order for the company to make significant changes whilst the business is temporarily operated by the chief executive. Often the company will be restructured in this time. Administration may be a better alternative to liquidation, as with liquidation, the company can no longer trade at all, whereas with administration, there is time to restructure the business.
A licensed Insolvency Practitioner (IP) will manage the company's affairs in order to protect the insolvent company's creditors. If the company cannot be saved during the administration process, the company is subsequently entered into liquidation to distribute the remaining funds.
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