The difference between administration and liquidation
The main differences between administration and liquidation can be summarised as follows:
- Administration is mostly a voluntary process
- A company in administration can continue to trade
- The purpose of entering administration is to try and rescue an insolvent company
- The administration process halts any legal action intended by creditors
- A company in administration can be broken up and sold off, and sell some of its assets, to satisfy its debts
- Administration affords the opportunity to safe staff
- A company in administration can be sold in its entirety as a going concern.
- Liquidation can be voluntary or compulsory
- A liquidated company must cease trading
- The purpose of liquidation is to close down an insolvent company
- The liquidation process is in itself legal action brought about by the company's creditors
- Only assets of a liquidated company can be sold to satisfy its debts
- A liquidated company can no longer employ staff
- A liquidated company cannot be sold as it ceases to exist.