In what circumstances does a company find itself in administration?
When a company is facing financial difficulties or has high company debt it can be placed into administration. This means that while the business is in administration the business, affairs and assets of the company are managed by a person ('the administrator') appointed for that purpose.
The administrator must be a licensed insolvency practitioner. The Administrator's objective is to rescue the company as a going concern or achieve a better result for the creditors than would be likely if the company were wound up without first being in administration, or if this is not practical realising assets to make a distribution to secured or preferential creditors. This is often achieved by selling the company, or by selling the company's assets. In many instances the company is still trading.
The use of prepackaged administrations may occur where an agreement for the sale of the business or assets is put in place prior to administration and the sale occurs at the same time as the insolvent practitioner is appointed.