Duties of an Administrator During Corporate Insolvency

When a company enters administration in England and Wales, an independent professional known as an administrator takes control of the company's affairs, business and property. This insolvency procedure is governed by the Insolvency Act 1986 (as amended) and aims to protect the company while maximising outcomes for creditors and other stakeholders. Understanding the duties and responsibilities of an administrator is essential for directors, creditors, employees and anyone affected by corporate insolvency.

This article explains, in clear and practical terms, what an administrator must do during administration, the legal framework, key procedural obligations, communication requirements and common questions about this role.

1. The Legal Basis for an Administrator's Duties

An administrator is appointed under Schedule B1 of the Insolvency Act 1986. They must be a licensed insolvency practitioner and, on appointment, become an officer of the court and agent of the company. Their appointment displaces the directors' control of the company's business and property, although directors remain in office and retain certain statutory duties. 

The core duty imposed by statute is to pursue one of the three objectives of administration:

1. Rescue the company as a going concern.
2. Achieve a better result for the creditors as a whole than would be likely if the company were immediately wound up.
3. Realise the company's property to make a distribution to one or more secured or preferential creditors, if rescue or a better result is not reasonably practicable. 

In all cases, the administrator must act in the interests of the creditors as a whole, and perform their functions quickly and efficiently. 

2. Taking Control and Securing Company Assets

Immediately upon appointment, an administrator has several duties related to control and protection of the company:

• Take custody or control of all company property to which the company is entitled. This includes land, plant, equipment, stock, intellectual property and bank accounts. 
• Safeguard and preserve assets to prevent poor asset realisation or loss of value before broader insolvency strategy decisions are made. 
• Manage ongoing business operations, including continuing or ceasing trading, if doing so assists in achieving the administration's objectives. 

The administrator has broad statutory powers to do “anything necessary or expedient for the management of the company's affairs, business and property”, including dealing with contracts, selling assets and dealing with tax matters. 

3. Preparing Proposals and Consulting Creditors

Within eight weeks of appointment, the administrator must prepare and distribute a statement of proposals that sets out how they intend to achieve the objectives of the administration. This document must be sent to:

• Creditors
• Employees (or employee representatives)
• Companies House

The proposals should describe the company's financial position, outline the intended strategy (e.g., restructuring, rescue or asset realisation) and explain how the administrator expects to deliver the best outcome for creditors. Creditors are then invited to approve, reject or suggest amendments to these proposals. 

Regular progress reports may also be required, especially where the administration continues for an extended period, and the administrator must revisit the strategy if circumstances change materially. 

4. Investigating the Company's Affairs

A key duty of the administrator is to investigate the company's financial affairs, including transactions and conduct leading up to the insolvency. This investigation helps:

• Identify assets of the company
• Assess potential claims against third parties (including directors)
• Detect transactions at undervalue or preferences
• Provide accurate information to creditors and the Insolvency Service where necessary 

If the administrator uncovers potential misconduct, such as wrongful trading or fraudulent transactions, they may report these matters to the Insolvency Service, which can take enforcement action, including seeking director disqualifications. 

5. Communication and Reporting Duties

Transparency and regular communication are essential aspects of an administrator's duties:

• Notify creditors, members and the court of their appointment, normally by notice and publication in The Gazette.
• Provide ongoing updates to creditors on progress and actions, and hold meetings where required.
• Maintain clear records of decisions, financial information, and asset realisations.
• Be prepared to answer creditor enquiries, ensuring stakeholders are informed about objectives and prospects. 

These communication duties help maintain trust, facilitate creditor decision‑making and ensure compliance with statutory reporting obligations.

6. Managing Contracts and Operational Decisions

Administrators have the power to manage or terminate existing contracts on behalf of the company. These may include supplier contracts, leases and employment agreements:

• Evaluate which contracts should continue based on viability and creditor benefit.
• Renegotiate, assume, assign or disclaim contracts where appropriate to protect value.
• Handle employee matters, including consultation and potential redundancies if continuing the business is not viable. 

Decisions about trading should align with the statutory objectives and be justifiable as reasonable in the interests of the creditors as a whole.

7. Acting as an Officer of the Court and Duty of Care

As an officer of the court, an administrator must act with honesty, good faith and impartiality, and ensure decisions withstand scrutiny. They have a professional duty of care to manage affairs with the competence expected of an experienced insolvency practitioner. If they fail in this duty, they could be held personally liable for losses to the estate. 

Administrators must also avoid conflicts of interest and maintain professional independence throughout the process, ensuring decisions are based on objective assessment rather than personal benefit. 

8. Considering Creditors and Asset Realisation

Throughout the administration, the administrator must balance actions to achieve the best outcome for creditors:

• Realise assets efficiently in situations where rescue is not possible.
• Ensure distributions to secured and preferential creditors follow statutory priority.
• Avoid unnecessary harm to creditor interests if realising assets for secured distributions. 

The administrator's costs and remuneration are paid out of the company's assets and take priority over unsecured creditor claims under the statutory scheme. 

9. Ending Administration and Transitioning

Administration normally lasts up to 12 months, though extensions can be obtained from the court or with creditor consent. The process ends when:

• The company is rescued or restructured successfully.
• The business or assets are sold or transferred as a going concern.
• It becomes clear that further administration is inappropriate and the company enters liquidation.

The administrator must ensure outcomes fully align with the statutory objectives and provide appropriate closures and distributions before ending the appointment. 

10. Common Questions About an Administrator's Duties

Does an administrator have to investigate misconduct?
Yes. Part of the administrator's duty is to investigate transactions and conduct preceding administration and report findings to authorities where relevant. 

Can an administrator continue trading the business?
Yes - continuing trade is permitted if it assists in rescue or secures a better outcome for creditors. Decisions must be justified in the administrators' proposals. 

Do administrators owe duties to directors?
Directors retain statutory duties but management powers are displaced. Directors must cooperate by providing information and access to records. 

Summary

In England and Wales, administrators appointed to manage companies in corporate insolvency have wide‑ranging duties and responsibilities rooted in statute and case law. These include securing and managing company assets, preparing proposals for creditors, carrying out investigations, communicating transparently with stakeholders, and acting in the best interests of creditors as a whole. Administrators must balance commercial decision‑making with statutory objectives, exercise professional care and maintain independence throughout the process. Understanding these duties helps directors, creditors and employees appreciate the legal framework and practical steps in corporate insolvency.