What does it mean when a shop is 'in administration'?

Last updated at 17:14
The HMV logo above a store

Sometimes we hear in the news that a well-known company is "in administration". This Newsround guide explains what that means.

What does "in administration" mean?

When shops are losing money, they may borrow some to pay their bills. They may even borrow products to sell in their stores.

If a shop can't pay its debts or borrow any more money, a special team may be brought in to take over from the management and sort out their money troubles - people and companies who are owed money can force this to happen in law.

When this happens we say the shop is "in administration".

What happens during administration?

The main job of administration is to save the company so it doesn't have to close down.

Sale signage in a store
Administration may mean closing parts of the company that are losing money - or holding a big sale to raise money quickly.

If a shop can't be saved, the company's belongings may be sold so that some of the borrowed money can be repaid. This is called liquidation.

What does it mean for customers?

Shops that stay open during administration will often stop accepting gift cards and vouchers.

The shop may also refuse to give any refunds. If an item is faulty, you will need to contact the manufacturer.

A Clintons store
Not every shop that goes into administration closes for good. 400 Clintons stores were saved by an American company in 2012.

Some companies can't be saved and well-known shops can close down for good.

The people who work in the shops lose their jobs which can be very upsetting.