Company Administration Vs Creditors’ Voluntary Liquidation

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We often hear of company directors who are confused by the difference between company administration and creditors’ voluntary liquidation (CVL). Both are formal insolvency processes, albeit with very different aims. In order to clear up any confusion regarding company administration and CVL, we’ve put together the following short and simple guide, looking at the difference between these two processes. Let’s start by taking a look at company administration. 

What is company administration?

Administration is a very useful process for protecting companies that are facing pressure from creditors. Company administration provides an automatic stay on any current or pending legal actions, giving the company the opportunity to restructure or to facilitate the sale of the business and its assets on a going concern basis. It’s important to emphasise that unlike liquidation, company administration can lead to the recovery of the business, returning it to profitability. 

Indeed, the purpose of company administration may be :

  1. To rescue the company on a going concern basis
  2. To provide a better outcome to creditors than would have been the case if the company had gone into liquidation
  3. To provide a return to one or more secured or preferential creditors. 

An administrator can be appointed by:

Directors/ Shareholders: In some circumstances it may be possible for a company to be placed into administration voluntarily by directors or shareholders using an ‘out of court’ method. 

Qualifying floating charge holders: Creditors who hold a qualifying floating charge over the company’s assets, may also have the ability to appoint an administrator ‘out of court’. 

Court:  Where an ‘out of court’ route isn’t available, creditors, directors or shareholders can apply to the court for the company to be placed into administration. 

Once an administrator has been appointed, there is a 12 month period before which the company administration process comes to an automatic end. By this point it’s expected that the purpose of the administration will be achieved. 

What is Creditors’ Voluntary Liquidation (CVL)?

Whilst a company administration may result in the business being returned to profitability, a CVL always results in the company being officially liquidated so that trading is ceased. There are both advantages and disadvantages of voluntary liquidation, however a CVL is always the best option for insolvent companies, where there is no viable chance of recovery. At this stage, the priorities of the creditors must be placed above those of the shareholders. 

When a company faces insolvency, it is better to enter voluntary liquidation rather than allowing the situation to escalate and risk facing a winding up order where the company may be forced to liquidate via a compulsory liquidation. A CVL is the best option for companies who have reached insolvency as it allows directors to:

  • Remove creditor pressure quickly
  • Prevent further legal action
  • Claim redundancy and other statutory entitlements from the government
  • Wind up the company in line with insolvency legislation so that directors can trade again in the future

What’s the difference?

The main difference between company administration and creditors’ voluntary liquidation is the final result. Both are options for companies that are facing financial difficulties. However, whilst a CVL will always result in the business ceasing and the company being dissolved, company administration may result in the company being restored to profitability or the underlying business sold as a going concern. 

What’s the best option for my company?

Whether company administration or voluntary liquidation is the best option for your company, really depends on the financial circumstances of the business. If the company is insolvent with no realistic chance of recovery or sale of the business, then a CVL will be the best option. Following a detailed assessment, if there is a realistic chance that the company could be recovered via a restructuring process, or there is a strong possibility that the business could be sold as a going concern, then company administration becomes an option. 

It’s important to be honest about your businesses’ financial circumstances and consult the guidance of a licensed insolvency practitioner to help you make the best decision for your company. Please don’t hesitate to get in touch with our experienced team at My Liquidation for informed, confidential advice.  


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