When a business faces financial distress, directors often ask me: “What’s the difference between administration and liquidation?” It’s a vital distinction.
Voluntary administration is a temporary process where an independent practitioner steps in to review the company’s affairs. The goal is to see whether the business can be saved, restructured, or sold as a going concern. Directors remain in place but hand over control of decision-making. If successful, administration can preserve jobs, honour contracts, and keep suppliers engaged.
Liquidation, on the other hand, signals the end of the road. The company’s assets are sold to repay creditors in an orderly fashion, and the entity is deregistered. Employees are paid from entitlements schemes where possible, and creditors may recover part of what’s owed.
The key difference is intent: administration is about saving, liquidation is about winding up. Both processes require objectivity, empathy, and clear communication with stakeholders.
For directors, the takeaway is simple: the earlier you seek advice, the more options you preserve. Waiting too long often means liquidation is the only path left.
Have you experienced or observed the administration process in action? What outcomes did you see?
