Administration vs liquidation

Administration and liquidation are often confused, but they have opposite purposes. Administration is a rescue procedure: it puts the company under a Licensed Insolvency Practitioner with a legal moratorium that stops creditor action, so the business can be saved, sold as a going concern, or restructured. Liquidation, by contrast, is a closure procedure: the company stops trading, its assets are sold, creditors are paid in order of priority, and the company is dissolved. The right choice depends on whether the underlying business is viable and worth preserving. If there is a viable business, goodwill or contracts worth more sold as a going concern than broken up, administration may protect and realise that value. If the business is not viable, an orderly liquidation is usually the more honest and cost-effective route. Administration is generally more expensive and involved, so it tends to suit larger or genuinely rescuable businesses, while a Creditors Voluntary Liquidation is the common route for closing a smaller insolvent company. Insolvency Act 1986; Insolvency Service

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