Can secured creditors block administration?

Secured creditors, particularly those holding a qualifying floating charge over company assets, have significant influence over the administration process. They have the legal right to appoint an administrator themselves if they believe their security is at risk. In practice, this means that directors cannot usually place a company into administration without notifying secured creditors in advance. While secured creditors cannot directly block administration, they can step in and appoint their own choice of administrator. This ensures that their interests are protected, especially if they have lent significant sums secured against company assets. For directors, this highlights the importance of engaging with lenders early and seeking their cooperation before starting the process. While secured creditors’ powers may seem restrictive, they are designed to balance the rights of those who provided secured funding with the need for fair treatment of all creditors. In many cases, collaboration with secured lenders helps ensure a smoother administration.