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Company Administrator

Also known as: Insolvency Practitioner, Corporate Administrator

Definition

A company administrator is a licensed insolvency practitioner appointed to take control of a financially distressed company to rescue it, restructure it, or achieve the best outcome for creditors.

Understanding company administrators is essential for business owners creating wills, as administration can override your succession plans and significantly affect what your beneficiaries inherit from your business.

What Does Company Administrator Mean?

Under the Insolvency Act 1986, Schedule B1, a company administrator is a licensed insolvency practitioner appointed to manage a company's affairs when the company is insolvent or likely to become insolvent. The administrator becomes an officer of the court with significant legal powers. The appointment creates a moratorium—legal protection preventing creditors from taking action against the company while a rescue plan is developed.

Administrators can be appointed by company directors, a secured creditor with a floating charge (typically a bank), or by court order. Once appointed, they take full control from directors and work toward one of three objectives in priority order: rescuing the company, achieving better returns for creditors than liquidation, or realizing property for secured creditors. They can continue trading, renegotiate contracts, make redundancies, sell assets, or sell the entire business.

For business owners creating wills, administration overrides your will provisions about business succession. If your company enters administration after your death, the administrator controls the business regardless of your will. Your executor cannot take control. Share values typically drop dramatically, affecting your total estate value. Proper succession planning should include life insurance, cross-purchase agreements, and clear executor guidance on handling business distress.

Common Questions

"When would a company administrator be appointed?" A company administrator is appointed when a company is insolvent or likely to become insolvent and needs protection from creditors. The appointment can be made by the company directors, a secured creditor with a floating charge, or by court order. Administration provides a legal shield preventing creditors from taking legal action while a rescue plan is developed.

"What does a company administrator do?" A company administrator takes control of the company's affairs, business, and property with the primary aim of rescuing it as a going concern. If rescue isn't possible, they work to achieve better returns for creditors than liquidation would provide. They can continue trading the business, renegotiate contracts, make employees redundant, or sell the company to pay off debts.

"How does company administration affect business succession planning in my will?" If your company enters administration after your death, the administrator takes control regardless of what your will says about business succession. This is why business owners should include contingency planning in their wills—such as life insurance to cover debts, clear instructions for executors, and pre-arranged buy-sell agreements with co-owners to protect business value for beneficiaries.

Common Misconceptions

Myth: Company administration is the same as bankruptcy or personal insolvency.

Reality: Company administration and personal bankruptcy are completely different. Administration applies to companies (separate legal entities) and aims to rescue the business. Personal bankruptcy applies to individuals. Directors are not personally bankrupt if their company enters administration unless they have personal guarantees or engaged in wrongful trading.

Myth: If my company is in administration, my shares are worthless and don't need to be included in my will.

Reality: Shares must be listed in your will even if they appear worthless during administration. Some companies successfully restructure and shareholders retain value. Administrators may achieve better outcomes than expected, resulting in distributions. Your will should include all assets, even those with uncertain value.

  • Limited Company: Administrators can only be appointed for limited companies, not sole traders or partnerships.
  • Company Shares: Administration drastically affects share value, with shareholders typically losing most or all value.
  • Business Assets: Administrators control all business assets and can sell or manage them to achieve objectives.
  • Insolvency: Insolvency is the prerequisite for appointing an administrator.
  • Director: Directors' powers are suspended when an administrator is appointed.
  • Business Succession Planning: Succession planning should account for administration risk and include contingency measures.
  • Liquidation: Unlike administration which aims to rescue, liquidation aims to close companies.
  • Business Succession Planning in Your Will
  • Passing Business Assets Through Your Will: Explains including business interests in wills and limitations during financial distress.
  • Limited Company Will Planning: Essential for company owners, covering insolvency scenarios and needed provisions.
  • Protecting Business Value in Your Will: Strategies to prevent value destruction if financial difficulties arise after death.
  • Director Succession in Wills: How administration affects director succession and backup provisions needed.

Need Help with Your Will?

If you own a business, understanding administration risks is crucial when creating your estate plan. Proper planning protects both your business value and your beneficiaries' inheritance.

Create your will with confidence using WUHLD's guided platform. For just £99.99, you'll get your complete, legally binding will plus three expert guides. Preview your will free before paying anything—no credit card required.

Legal Disclaimer:

This article provides general information only and does not constitute legal or financial advice. WUHLD is not a law firm and does not provide legal advice. Laws and guidance change and their application depends on your circumstances. For advice about your situation, consult a qualified solicitor or regulated professional. Unless stated otherwise, information relates to England and Wales.