Administration vs liquidation
Administration and liquidation are often confused, but they have opposite purposes. Administration is a rescue procedure: it puts the company under a Licensed Insolvency Practitioner with a legal moratorium that stops creditor action, so the business can be saved, sold or restructured. Liquidation is a closure procedure: the company stops trading, its assets are sold, creditors are paid in order of priority, and the company is dissolved. The right choice depends on whether the business is viable. Insolvency Act 1986; Insolvency Service
- Administration
- Rescue: a legal moratorium stops creditor action while a plan is found (Insolvency Act 1986, Schedule B1 paragraph 43)
- Liquidation
- Closure: assets sold, creditors paid in statutory order, company dissolved
- The test
- Is the underlying business viable and worth saving?
- Cost
- Administration is generally more involved and expensive
Talk it through, free and confidential No obligation. We review your situation and point you to the right next step.
Which route: CVL, CVA or administration?
1. Is the underlying business viable and worth saving? If not, the route is a CVL.
2. If it is viable, does it need urgent protection, or is a sale the best outcome? If yes, administration. If it can pay over time, a CVA.
- CVLCreditors' Voluntary Liquidation
- Business not viable. Close it properly: assets are sold, creditors paid in order of priority, the company dissolved.
- CVACompany Voluntary Arrangement
- Sound business, affordable payments. Directors keep control and repay creditors over 3 to 5 years, supervised.
- AdministrationRescue or going-concern sale
- Needs urgent protection or a sale. A practitioner takes control and a moratorium stops creditor action.
At a glance
| Administration | Liquidation | |
|---|---|---|
| Purpose | Rescue: protect, then save or sell the business | Closure: sell assets, pay creditors, dissolve |
| Best for | A viable business worth preserving | A business that is not viable |
| Creditor action | A legal moratorium stops creditor action from the moment the company enters administration (IA 1986 Sch B1 para 43) | A CVL has no automatic moratorium. In a compulsory liquidation, court action against the company needs the court's permission once the winding-up order is made (IA 1986 s130(2)). A creditor can petition before the directors act |
| Who takes control | A practitioner acting as administrator | A liquidator (in a CVL, the directors start it) |
| Likely outcome | Restructured, sold as a going concern, or rescued | Trading stops and the company is dissolved |
| Cost | Usually more work and more cost: there is no published fee scale, the fee basis is set under the Insolvency Rules | A CVL is the usual route for a smaller company; ask for a written quote |
Viability is the deciding factor
If the business can trade profitably once pressure is dealt with, administration or a CVA may rescue it, and goodwill or contracts are often worth more sold as a going concern than broken up. If it cannot, an orderly CVL is usually the right route.
The deadline that matters is not a date but a point: once there is no reasonable prospect of avoiding insolvent liquidation or administration, a director who carries on trading can be made personally liable for wrongful trading (Insolvency Act 1986, s214). From that point the company should stop taking new credit and the directors should take advice. Which route the facts support is a question for a Licensed Insolvency Practitioner; you can choose your own from the official register.
Where to go from here
- If you decide to speak to a Licensed Insolvency Practitioner, choose your own: our practitioner directory lists every practitioner on the official Insolvency Service register, and how to choose an insolvency practitioner explains what to ask. Always confirm their entry on the official register before you instruct anyone.
Common questions
Is administration better than liquidation?
Neither is universally better; they do different jobs. Administration suits a viable business worth rescuing or selling; liquidation suits closing a business that is not viable. The right answer depends on your company.
Which costs more, administration or liquidation?
Usually administration. There is no published fee scale for either: the Insolvency Rules set how the fee is fixed and who approves it, not how much it is. Our administration cost calculator shows where the money goes, and for a smaller insolvent company a CVL is the usual route. Ask any practitioner for a written quote.