Administration vs liquidation — what actually differs
A licensed administrator takes control, a legal moratorium freezes enforcement, and they try — in this order — to rescue the company, sell it as a going concern, or realise assets for secured creditors.
A liquidator converts what's left to cash, pays creditors in statutory order, and dissolves the company. No rescue, no moratorium, no going-concern sale.
Side-by-side comparison
| Dimension | Administration | Liquidation |
|---|---|---|
| Purpose | Rescue the business or maximise creditor return | Close the company and distribute assets |
| Who runs it | Administrator (licensed IP) | Liquidator (licensed IP) |
| Directors' powers | Suspended — administrator takes control | Extinguished on appointment |
| Trading | Usually continues, at least initially | Almost always stops |
| Moratorium | Yes — automatic legal freeze on enforcement | No formal moratorium |
| Typical duration | 3–12 months (extendable) | 6–24 months to distribute and dissolve |
| Creditor outcome | Often higher via going-concern sale | Break-up value only |
| Employees | Frequently retained via TUPE on sale | Redundant on day one |
| Cost | Higher (fees, sale costs, trading losses) | Lower (narrower workstream) |
| Legal basis | Schedule B1, Insolvency Act 1986 | Parts IV–V, Insolvency Act 1986 |
Which fits when
- A viable trading business exists
- There is going-concern goodwill (brand, contracts, staff)
- A buyer is realistic within 90 days
- A moratorium is needed to fend off enforcement
- Trading is unviable and cash has run out
- No credible buyer exists
- Assets are limited to stock/plant/receivables
- Directors want the fastest, cheapest closure
- The company is viable but debt is unmanageable
- Creditors can be persuaded to accept a compromise
- Directors want to stay in control
- There is no immediate enforcement threat
The timeline, at a glance
Appointment + moratorium
Stabilise, market for sale
Complete sale / propose CVA
Exit to CVL or dissolution
Trading stops, staff dismissed
Assets identified and valued
Assets realised, debts adjudicated
Distribution and dissolution
Who gets paid, and in what order
The statutory waterfall is identical in both processes. Fixed-charge holders and expenses of the process rank first, then preferential creditors (employee arrears and — since December 2020 — HMRC for VAT, PAYE and NIC), then the prescribed part is set aside for unsecured creditors from floating-charge realisations, then floating-charge holders, then ordinary unsecured creditors, then shareholders. Administration usually generates more cash to work through this waterfall than liquidation, but the order does not change.
The same company, two outcomes
Meridian Foods enters administration with £4.2m of debt. The administrator continues trading, runs a five-week sale process and sells the brand, kit and 82 of 110 jobs to a competitor for £2.8m. Secured lender is paid in full, HMRC recovers 88%, unsecured creditors receive 14p in the pound via the prescribed part.
Meridian Foods enters liquidation instead. Trading stops on day one, staff are dismissed, the brand loses value overnight. The liquidator realises £1.1m by auctioning plant and selling receivables. Secured lender takes almost all of it; unsecured creditors receive 2p in the pound. All jobs are lost.
Frequently asked questions
Is administration better than liquidation?
Not automatically. Administration aims to rescue value; liquidation aims to close the company and distribute what's left. Administration is 'better' when there is a viable trading business, going-concern goodwill, or a buyer waiting. If the company is genuinely finished, liquidation is faster and cheaper.
Can a company move from administration into liquidation?
Yes — and most do. When the administrator has realised the assets they can convert the administration into a Creditors' Voluntary Liquidation (CVL) to complete distributions and formally dissolve the company.
Which is cheaper — administration or liquidation?
Liquidation is usually cheaper because the process is narrower. Administration involves trading decisions, a moratorium, a sale process and detailed reporting, so fees are higher. Trade-off: a well-run administration typically returns more to creditors.
Who decides between administration and liquidation?
Directors, taking licensed insolvency advice, choose the entry route. Once inside a process the appointed insolvency practitioner runs it, subject to court and creditor oversight.
Does the company keep trading in either?
In administration, usually yes — trading preserves going-concern value. In liquidation the company almost never trades; the liquidator's job is to convert assets to cash.
What happens to jobs?
Administration often protects jobs by selling the business as a going concern. Liquidation almost always ends employment on day one, with staff becoming preferential creditors for wages and holiday pay.
Which process is public?
Both. Notices are filed at Companies House and published in The Gazette. Administration filings are more voluminous (proposals, progress reports, SIP 16 where relevant); liquidation filings are shorter.
Can a solvent company use either?
A solvent company can only use a Members' Voluntary Liquidation (MVL) — a form of liquidation used to wind up a healthy company tax-efficiently. Administration is by definition for insolvent or nearly-insolvent companies.