How does administration differ from liquidation?

Administration and liquidation are both formal insolvency procedures, but they serve different purposes. Administration is designed to rescue or restructure a company, or at least achieve a better result for creditors than liquidation. The administrator takes control of the company, protects it from creditor action, and explores options such as CVAs, business sales, or asset realisations. Liquidation, by contrast, is focused on closing the company down. In liquidation, the company ceases trading, assets are sold, and the proceeds distributed to creditors. Employees are automatically dismissed and the company is eventually struck off the register. While administration may end in liquidation if no rescue is possible, it offers more flexibility and potential for survival. Directors facing financial distress should understand these differences, as administration may give the company a chance to recover, whereas liquidation is final. Choosing between the two depends on whether the business has a realistic prospect of turnaround or not.