This guide is maintained as a current resource for September 2026 and covers only the laws of England and Wales. Information is for general guidance, not legal advice. Consult a qualified solicitor for advice specific to your situation.
A comprehensive guide explaining when administrators can restructure a company in administration in England and Wales, including statutory purposes, restructuring options such as CVAs and pre‑packs, procedural requirements, timing and legal considerations for creditors and stakeholders.
In England and Wales, placing a company into administration gives an independent insolvency practitioner - the administrator - statutory powers to manage the company's affairs, business and property. One of the principal aims of administration is to provide a legal platform from which a financially distressed company can be restructured in a way that preserves value, protects jobs and delivers a better result for creditors than immediate liquidation. However, administrators cannot restructure a company in any way they choose: the circumstances in which they can do so are shaped by law, the company's commercial viability and creditor interests.
This article explains when administrators can implement a restructuring, what forms restructuring can take, the legal requirements and practical implications for directors, creditors and stakeholders.
1. Administration as a Mechanism for Restructuring
When a company enters administration, a statutory moratorium on creditor action comes into effect. This provides breathing space, preventing most legal enforcement (such as winding‑up petitions and creditor enforcement) while the administrator assesses the company's position and develops a plan.
The statutory purpose of administration, as set out in the Insolvency Act 1986, prioritises three outcomes in order:
- Rescuing the company as a going concern;
- Achieving a better result for creditors as a whole than would occur on immediate liquidation;
- Realising the company's property to make distributions to secured or preferential creditors.
Restructuring essentially falls under the first two objectives: it involves reorganising the company's financial and operational structure in a way that preserves the business or maximises value for creditors.
2. When Restructuring Is Possible: Viability and Insolvency Tests
2.1 Evidence of Insolvency or Likely Insolvency
A company can only enter administration if it is insolvent or likely to become insolvent, except in limited cases involving floating charge appointments. Administrators will therefore first determine whether the company meets this test - that its liabilities outweigh assets or it cannot pay debts as they fall due.
2.2 Reasonable Prospects of Rescue or Better Outcome
Restructuring becomes a realistic option only if the administrator believes that:
- The company has fundamental viability, meaning its business model and operations could be restored under new terms; or
- Restructuring could produce a better result for creditors than liquidating assets immediately.
If administrators conclude that neither objective is reasonably achievable, they will usually focus on asset realisation rather than restructuring.
3. Forms of Restructuring During Administration
Restructuring in administration can take a variety of forms, depending on the circumstances:
3.1 Direct Internal Reorganisation
Administrators can restructure by reorganising the company's operations, cost base and contracts:
- Reducing overheads or renegotiating supplier contracts;
- Scaling back unprofitable divisions;
- Revising organisational structure to make the business sustainable.
These measures are often undertaken early in the administration once administrators have taken control and assessed the company's affairs.
3.2 Company Voluntary Arrangement (CVA)
While administration itself does not contain an inbuilt mechanism to compromise debts, administrators can propose a Company Voluntary Arrangement (CVA) - a legally binding agreement between the company and its creditors to repay debts under revised terms. CVAs can form part of an administration strategy if stakeholders agree.
A CVA requires creditor approval in a formal vote and must be incorporated into the administrator's proposals where restructuring depends on such compromise.
3.3 Scheme of Arrangement or Restructuring Plan
Administration can be combined with other statutory restructuring tools such as a scheme of arrangement or a restructuring plan under the Companies Act. These tools allow sanctioned compromise of creditor claims, particularly in complex or larger restructurings, but involve additional legal frameworks and often court approval.
3.4 Pre‑Packaged Sales to Facilitate Restructuring
A pre‑pack administration involves the sale of the business or its assets agreed before the formal appointment of administrators and executed immediately afterwards. Although this does not restructure the underlying legal entity, it often transfers viable trading operations into a new company with a restructured financial base.
Pre‑packs are typically used when prolonged negotiation would further erode value - for example, when cash resources are exhausted but the business is fundamentally viable.
4. Legal and Procedural Requirements for Restructuring
4.1 Administrator's Proposals
Administrators must prepare a statement of proposals for how they intend to achieve the administration's objectives, including any restructuring plan, within eight weeks of appointment. These proposals explain the rationale for restructuring, how it will work, and the likely effects on creditors and other stakeholders. Creditors then receive and can challenge these proposals through formal procedures.
4.2 Independent Scrutiny and Connected Parties
For certain restructuring transactions - particularly disposals to connected persons (for example, existing directors or shareholders) - regulations require independent scrutiny or creditor approval within the first eight weeks of administration. This is designed to prevent conflicts of interest and protect creditor value.
4.3 Creditors' Rights and Voting
Where restructuring involves a compromise of debts (for example, through a CVA or restructuring plan), creditors may vote on the terms. Administrators must facilitate these procedures in accordance with statutory rules and provide information required for informed decision‑making.
5. Timing and Limits of Restructuring Activity
5.1 During the Administration Period
Restructuring efforts generally take place within the administration period, which lasts up to 12 months, unless extended by the court or with creditor consent.
Early in the process, administrators assess the company's financial outlook. If a rescue or reorganisation strategy is feasible, they will propose it as part of the statutory proposals and implement parts of the plan as creditor and legal requirements allow.
5.2 Extending Administration for Restructuring
If restructuring progress requires more time than the standard administration period, administrators can apply to extend the period with the consent of creditors or by court order. This extension allows more time to complete complex negotiations or restructuring actions.
6. Risks and Practical Considerations
6.1 Restructuring Not Always Achievable
Administrators cannot restructure every company. If the business is fundamentally unviable, restructuring attempts are likely to fail and may instead focus on asset realisation for creditor benefit.
6.2 Impact on Creditor Returns
Even where restructuring occurs, creditor returns can vary widely depending on the value preserved and the terms of compromised debts. Some unsecured creditors may receive less under a restructuring than they would from an orderly liquidation if value cannot be preserved.
6.3 Regulatory and Legal Oversight
Certain restructuring actions, especially those involving connected parties or significant dispose of assets, may trigger additional regulatory requirements and scrutiny to ensure fairness and compliance.
7. Common Questions
Can administrators restructure a company without creditor consent?
Administrators can implement internal reorganisation and negotiate plans, but formal compromises of debts (such as under a CVA) generally require creditor consent. Restructuring sales to connected persons also attract regulatory checks.
Does administration guarantee a rescue?
No. Administration provides legal protection and a platform for restructuring, but whether rescue is achievable depends on the company's viability and financial position.
Are directors involved in restructuring decisions?
Once administrators are appointed, directors lose control over daily management. Administrators lead restructuring efforts, although directors may provide information and insight to assist the process.
Summary
Administrators can restructure a company during administration when there is a reasonable prospect of rescuing the business as a going concern or achieving a better outcome for creditors than immediate liquidation. Restructuring may involve internal operational changes, formal arrangements such as a CVA or restructuring plan, or pre‑packaged sales. Legal and procedural requirements - including proposals to creditors, independent scrutiny for certain transactions, and creditor voting - shape when and how restructuring can proceed. The ultimate feasibility of restructuring depends on the company's financial viability and stakeholder support, with administration providing the statutory framework and protection necessary to explore these options.
