What is the purpose of an administration order?

The purpose of an administration order is primarily to provide a company facing financial difficulties with the opportunity to reorganize its affairs and avoid going into bankruptcy. This process is designed to protect the company while it attempts to recover and become financially viable again. An administrator is typically appointed to manage the company's operations and work on a turnaround strategy.

During this period, the company's existing creditors are temporarily suspended from taking action against it, allowing the administration process to take place without the immediate threat of liquidation. The aim is to restructure the business, which can involve negotiating new terms with creditors, selling parts of the business, or implementing operational changes to improve profitability.

While wiping out company debts entirely might sound appealing, it is not the goal of an administration order; rather, it seeks to enable the company to survive and emerge stronger. Similarly, though employee income may be supported during this period, guaranteeing wages is not the main objective of the administration process. Moreover, formalizing debt repayment plans is more characteristic of other processes such as company voluntary arrangements rather than administration itself. Thus, the essence of the administration order lies in giving the company a crucial chance to reorganize.