What are the disadvantages of administration?

Despite its benefits, administration also has drawbacks that directors must consider. The most obvious is the loss of control, as directors hand over management to the administrator. This can be difficult for business owners who are used to making independent decisions. The cost of administration is also significant, often higher than a CVA, because administrators must manage complex legal and operational tasks. In addition, the process can damage reputation and relationships with customers, suppliers, and employees, particularly if news of the administration is publicised. Creditors may also be sceptical of the process, especially in pre-pack sales, where connected parties are involved. Finally, administration does not guarantee survival. Many companies in administration still end up in liquidation if rescue or sale is not possible. Directors must weigh these disadvantages against the benefits of protection and restructuring to determine whether administration is the right option for their business.