Rejected Administration Proposals: What Happens Next?

This article explores the statutory framework, the common reasons proposals are rejected, and the key case law that guides the steps that follow.

The statutory framework

Paragraphs 49 – 55 of Schedule B1 of the Insolvency Act 1986 (“the Act”) set out the administrator’s obligations. In summary, administrators must:

• Prepare a statement of proposals within eight weeks of the company entering administration.
• Circulate the proposals to all known creditors (other than opted-out creditors) and to all known members of the company.
• Seek a decision from creditors within ten weeks of the administration commencing, using a qualifying decision procedure under Part 15 of the Insolvency (England and Wales) Rules 2016 (“IR 2016”).
• Report the outcome of creditors’ decision to the body of creditors, the court and the Registrar of Companies - whether the proposals are approved or not. Failure to do so without reasonable excuse is a breach of statutory duty.

In most cases, creditors approve the proposals as drafted, enabling the administrator to proceed with the proposed strategy. 

Where creditors do not approve the proposals, the administrator remains in office but lacks the authority to implement the strategy. The Act does not prescribe a fixed outcome in this situation, which is why case law plays a central role in determining the next steps.

Why creditors reject proposals

Rejection is relatively rare, but when it happens, it is often driven by:

• Insufficient detail or transparency
• Disagreement over asset valuations
• Concerns about the proposed distribution of funds
• Doubts about the viability of a rescue plan
• Suspicion that directors’ conduct has not been fully investigated.

Courts expect administrators to address these concerns meaningfully, either by revising the proposals or by seeking directions promptly.

So, what should the administrator do? 

Because the legislation does not dictate what happens next, the courts have shaped the practical response to rejected proposals.

What happens when administration reaches a dead end?

In BTR (UK) LTD (Lavin v Swindell) [2012] EWHC 2398 (Ch), creditors rejected the administrator’s proposals and sought to compel the administrator to petition for the company’s winding‑up. The administrator resisted, arguing that he retained discretion. Creditors applied to court. 

The court held that:

• The court has an inherent jurisdiction to order a winding‑up where proposals are rejected and the administration cannot properly continue.
• An administrator is not automatically obliged to apply for directions when proposals are rejected (although they must report the outcome).
• Where the administration reaches an impasse, the administrator should seek the court’s guidance.

Does rejection automatically end the appointment?

The case of Costley‑Wood & Ors v Rowley & Anor (Re Patisserie Holdings PLC) [2021] EWHC 3205 (Ch) involved a creditors' committee declining to approve the proposals. The administrators elected to continue the administration in accordance with modified proposals, which included transitioning the company from administration to creditors voluntary liquidation, without seeking directions under paragraph 55 of Schedule B1 of the Act. 

The Court held that:

• An administrator's appointment continues until it ceases in accordance with the provisions of Schedule B1 to the Act.
• There is no provision stating that an administrator’s appointment ends simply because creditors reject proposals.
• The administrators may continue the administration in accordance with modified proposals approved by the creditors' committee.  

Although the court identified procedural breaches, they deemed them non‑fundamental and did not cause substantial injustice to creditors. Importantly, the court also:

• Examined the administrators’ conduct, investigations and decision‑making;
• Reinforced that administrators must act fairly, transparently, and within the statutory purpose of administration; and
• Emphasised that administrators’ decisions must be grounded in proper reasoning and evidence.

The recent case of PPE Medpro Ltd (in Administration) [2025] EWHC 3449 (Ch) concerned the rejection of the administrators’ proposals by the company’s creditors. The proposals were based on achieving the administration’s purpose under paragraph 3(1)(c) of Schedule B1 of the Act, which is to realise property to make a distribution to one or more secured or preferential creditors.

Following this rejection, the administrators sought directions from the court under paragraphs 55 and 63 of Schedule B1 of the Act. The court accepted that, in principle, the statutory purpose might still be achievable depending on the scope, cost and effectiveness of investigations the administrators proposed to undertake and the resulting prospects of a distribution to the secured creditor. However, the court placed significant weight on the position of the majority creditor, the Secretary of State for Health and Social Care, who strongly opposed the proposals and instead sought compulsory liquidation with the Official Receiver as liquidator. Given the strength of creditor opposition and recognising that creditor confidence in the administration process had been undermined, the court discharged the administrators and ordered that the company move into compulsory liquidation. 

This decision underscores several important principles for future administrations. First, where a significant creditor, particularly one with a dominant or majority claim, raises valid concerns and rejects the administrators’ proposals, the court is likely to give substantial weight to those concerns. Secondly, the case demonstrates that administration cannot be used as a mechanism to shield the company or its stakeholders from creditor scrutiny. Finally, it highlights the need for administrators to maintain creditor confidence through transparency and impartiality, and putting forward well‑reasoned proposals that clearly demonstrate how the statutory purpose of administration is capable of being achieved.

What happens in practice when proposals are rejected

In practice, rejection of proposals typically leads to one of four outcomes.

1. Administrators Must Revisit Their Strategy

Rejection forces administrators to reconsider their approach. They may need to provide further detail, adjust asset-realisation strategies, reassess the viability of a rescue and address creditor concerns directly.  Revised proposals must then be circulated for another vote.

2. Liquidation may become the next step 

If no viable proposals can be agreed, the administrator may conclude that the statutory purpose of administration cannot be achieved. In such cases, liquidation becomes the logical next step. This aligns with the principle in BTR (UK) Ltd (Lavin v Swindell) [2012] EWHC 2398 (Ch) where proposals fail and no progress can be made, the court may order winding‑up.

3. Creditors may seek to replace the administrator

Creditors may request a decision procedure to consider replacing the administrator, particularly where there is a perceived conflict of interest, communication has broken down, and/or creditors believe another practitioner would better protect their interests. The court will not interfere lightly, but it will intervene where justified.

4. Either party may apply to court

The administrator or creditors may apply to court for directions. The court has wide discretion and may order:

• Amendments to the proposals;
• That the administrator’s appointment cease from a specified time;
• Replacement of the administrator;
• Bringing the administration to an end;
• Compulsory liquidation (as in BTR (UK) Ltd (Lavin v Swindell) [2012] EWHC 2398 (Ch) and PPE Medpro Ltd (in Administration) [2025] EWHC 3449 (Ch)); or
• Any other order that the court thinks appropriate.

How can rejection be avoided?

There’s no guaranteed way to prevent creditors from rejecting administration proposals, but administrators can significantly reduce the risk by managing information, expectations, and engagement from the outset. Effective measures include:

• Producing clear, credible, and commercially grounded proposals. Creditors are more likely to approve proposals that set out a realistic strategy, explain why the chosen route maximises returns, and provide transparent financial information.
• Engaging early with key creditors. Early discussions with major creditors help identify concerns before proposals are finalised.
• Demonstrating independence and impartiality. Proposals are vulnerable to rejection if creditors perceive bias or undue alignment with management.
• Addressing anticipated concerns within the proposals themselves. Administrators should proactively explain why the strategy is viable, how risks will be managed, and how expected returns compare with alternatives (such as liquidation).
• Communicating clearly and consistently. Regular updates help manage expectations.
• Keeping costs proportionate and well‑justified. Transparent fee information reduces the risk of objections based on remuneration (which is a common source of creditor dissatisfaction).
• Ensure strict procedural compliance. Technical defects can trigger objections even where creditors support the strategy.
• Stabilising the position pre‑appointment where possible. If the business is fragile or creditor hostility is anticipated, steps such as securing emergency funding, protecting key assets, or negotiating critical supplier terms can strengthen the proposals.

Conclusion

Where proposals are rejected, decisive action, early engagement and procedural discipline are not merely best practice, but they are essential to preserving control of the administration and avoiding an enforced and premature exit.