What Does It Mean When a Company Is Placed Under Administration?

When you hear that a company has been “placed under administration,” it doesn’t mean the business is dead. It means the company is in financial distress—and someone has stepped in to try and save it.

Let’s break it down.

First, what is administration?

Administration is a legal process that kicks in when a company is unable to pay its debts. Instead of shutting down immediately, the law allows the business to pause, reorganise, and possibly recover.

A licensed expert, called an administrator, is appointed to take control. Their job? To figure out the best way forward. That could mean:

• Keeping the business running while fixing its finances
• Selling off parts of the company
• Negotiating with creditors to reduce or delay payments

In Kenya, this process is guided by the Insolvency Act, 2015, which gives struggling companies a second chance before liquidation.

Why Would a Company Go Into Administration?

Here are common reasons:

• The company has too much debt and can’t repay it on time.
• Creditors believe recovery is possible and prefer it over shutting down.
• The court sees a chance to protect jobs, assets, and suppliers.

Take ARM Cement, for example. Despite its reputation and a $140 million investment from the UK’s CDC Group, it was placed under administration in 2018. The goal was to protect the business and its creditors while exploring recovery options.

How Does the Process Work?

1. Appointment

An administrator can be appointed by:

• The company itself
• Creditors (like banks)
• A court order

Once appointed, the administrator takes full control of operations.

2. Protection from Creditors

The company gets a legal “shield.” Creditors can’t sue, seize assets, or auction property without court approval.

3. Recovery Plan

The administrator reviews the company’s finances and proposes a way forward. This could include:

• Selling parts of the business (called pre-pack administration)
• Creating a new payment plan (Company Voluntary Arrangement)

Real-Life Example: East African Cables

In 2023, Equity Bank sought to recover KSh 2.2 billion from East African Cables. The High Court placed the company under administration. This gave it breathing room to restructure and blocked any asset seizures.

By August 2025, administrators had held the first creditors’ meeting and were exploring new investors.

How Long Does Administration Last?

Usually, it lasts up to 12 months, but the court can extend it. It ends when:

• The company is rescued and handed back to the directors
• The administrator recommends liquidation
• All assets are sold, and money is distributed

Key Takeaways

• Administration is not liquidation. It’s a rescue mission.
• Creditors are protected—but so is the company.
• The goal is to keep the business alive, if possible.