When a company enters administration, the directors do not automatically lose their position, but they usually lose control over the day-to-day management of the business.
The appointed administrator takes control of the company and directors can only exercise management powers with the administrator’s consent.
For the wider process, see our Company Administration guide.
💡 Quick Answer
Directors usually remain formally appointed when a company enters administration, but control of the business passes to the administrator.
Directors must cooperate with the administrator, provide company records and information, and should not make management decisions without permission.
Administration does not automatically make directors personally liable for company debts, although guarantees, director conduct and certain transactions may still create personal risk.
Do Directors Lose Control in Administration?
Yes, in practical terms.
Once the administrator is appointed, they take control of the company’s affairs, business and property.
Directors can no longer make normal management decisions unless the administrator specifically allows them to do so.
This can include decisions around:
- spending;
- employees;
- suppliers;
- asset sales;
- contracts;
- borrowing; and
- trading strategy.
In some cases, directors may remain involved in day-to-day operations under supervision, particularly in a Light Touch Administration.
Do Directors Remain Appointed?
Usually, yes.
Entering administration does not automatically remove a director from office.
However, remaining formally appointed is very different from continuing to control the company.
The administrator has overall authority and directors must follow their instructions.
What Must Directors Do During Administration?
Directors are expected to cooperate fully with the administrator.
This typically includes:
- providing accounting records;
- explaining the company’s financial position;
- identifying assets and liabilities;
- supplying details of creditors;
- providing employee information;
- explaining recent transactions; and
- assisting with investigations where required.
Failing to cooperate can make the process more difficult and may create additional concerns about director conduct.
Are Directors Investigated?
Director conduct is normally reviewed as part of the insolvency process.
The administrator will consider how the company was managed before entering administration and whether there were any transactions or decisions that require further investigation.
This may include looking at:
- payments to directors;
- director loan accounts;
- asset transfers;
- preferences;
- transactions at undervalue;
- continued trading while insolvent; and
- whether company records were properly maintained.
A conduct review does not automatically mean wrongdoing has occurred.
Can Directors Become Personally Liable for Company Debts?
Normally, company debts remain debts of the limited company.
Administration does not automatically transfer those liabilities to the directors personally.
However, personal liability can arise in specific circumstances.
Examples may include:
- personal guarantees;
- overdrawn director loan accounts;
- wrongful or fraudulent trading;
- misfeasance;
- certain tax-related liabilities; or
- transactions that breach directors’ duties.
For many directors, the biggest practical exposure is often a personal guarantee rather than the company debt itself.
What Happens to Personal Guarantees?
Administration does not usually cancel a director’s personal guarantee.
If a director has personally guaranteed:
- a bank loan;
- asset finance;
- property borrowing;
- supplier credit; or
- another company liability,
the lender or creditor may still be able to pursue the director personally if the company defaults.
The exact position depends on the wording of the guarantee.
Directors who have signed guarantees should identify them early and take advice on their personal exposure.
What Happens to a Director’s Loan Account?
The administrator will review any director’s loan account.
If a director owes money to the company because the loan account is overdrawn, the administrator may seek repayment.
An overdrawn director’s loan account is generally treated as an asset of the company.
If the company owes money to a director instead, the director may have a creditor claim in the administration, subject to the nature of the debt.
Can Directors Still Be Paid?
Potentially.
If directors continue working for the company with the administrator’s agreement, payment may be possible.
However, directors should not simply continue withdrawing salary, dividends or other payments without the administrator’s approval.
The administrator will decide what ongoing management involvement is necessary and how it should be treated.
Can Directors Start Another Company?
Administration does not automatically stop someone from being a director of another company.
However, directors must continue complying with company law and any restrictions that may apply.
If the administration later results in liquidation, there may also be restrictions around reusing the insolvent company’s name.
Professional advice should be taken before establishing or trading through a similar new company.
What Happens If the Business Is Sold?
A company in administration may be sold as a going concern.
The buyer could be:
- an independent third party;
- an investor;
- a competitor; or
- in some cases, a company connected to the existing directors.
Where existing directors are involved in purchasing the business, additional scrutiny can apply.
This is particularly relevant in a Pre-Pack Administration, where connected-party transactions are subject to additional safeguards.
What Duties Do Directors Have Before Administration?
Directors should be especially careful when insolvency becomes likely.
When a company is financially distressed, directors need to consider creditor interests and avoid taking actions that unnecessarily worsen the position.
Warning signs can include:
- persistent cash-flow problems;
- unpaid HMRC liabilities;
- suppliers being left overdue;
- repeated failed payment arrangements;
- legal action from creditors; or
- reliance on new borrowing to pay existing debts.
Our HMRC Tax Debt guide explains the options where tax arrears are a major part of the problem.
What Happens After Administration Ends?
The outcome depends on what the administrator achieves.
The company may:
- return to the directors after being rescued;
- enter a Company Voluntary Arrangement;
- be sold;
- enter a Creditors’ Voluntary Liquidation; or
- ultimately be dissolved.
If the company is rescued successfully, control may return to the directors when administration ends.
Get Help With Company Administration
Administration can significantly change a director’s role and responsibilities.
Directors may lose day-to-day control of the company, but they still have important obligations to cooperate with the administrator and provide accurate information.
Business Helpline provides free, confidential initial advice to limited company directors considering administration or other insolvency options.
For the wider process, read our Company Administration guide or contact us to discuss the company’s circumstances.
Call our free 24-hour helpline on 0800 088 2142 or request a confidential call back.
Directors in Administration FAQs
Do directors lose their jobs when a company enters administration?
Not automatically. Directors usually remain formally appointed, but control of the company passes to the administrator.
Can directors still run the business?
Only with the administrator’s consent. In some cases, directors may remain involved in day-to-day management, but the administrator retains overall control.
Are directors personally liable for company debts?
Usually not simply because the company enters administration. However, personal guarantees, overdrawn loan accounts or misconduct can create personal liability.
What happens to personal guarantees in administration?
They normally remain enforceable. A creditor may still pursue the director personally if the guaranteed company debt is not repaid.
Are directors investigated during administration?
Their conduct is reviewed as part of the insolvency process, including relevant transactions and how the company was managed before administration.
Can a director start another company after administration?
Potentially, yes. Administration does not automatically disqualify someone from being a director, although other legal restrictions can apply depending on the circumstances.
