Over our years of working within insolvency, we have been asked many questions by directors whose business is facing Receivership. When designing this website, we thought that it would be best to summarise those queries that have been raised most frequently. If you have a question that you would like to ask, please contact us. We will be happy to reply to you directly and keep this page updated.
What is a Receivership ?
There are four types of Receivership, but what they all have in common is that a Receiver is appointed by a secured creditor to attempt to recover that creditor’s money.
What is Administrative Receivership ?
They are now rare as they can only happen where a company has given security to a creditor before September 2003. An Administrative Receiver is appointed by such a charge (referred to as a floating charge or debenture) if it covers substantially the whole of the company’s assets, including its goodwill. The Court and general body of creditors are not involved in an Administrative Receiver’s appointment.
Who does an Administrative Receiver act for ?
Their primary duty is to their appointor; so the bank or lender. They will also have obligation to preferential creditors and to unsecured creditors, although not at the expense of who appointed them.
What can an Administrative Receiver do ?
They can trade on and often will, even if only for a limited period. The hope will be that a buyer can be found for the business as a going concern. If this is not possible the Administrative Receiver will start to close the business.
How does an Administrative Receivership end ?
If the secured creditor has not been paid in full then the company will be struck off the register at Companies House and unsecured creditors will get nothing. If there is surplus money or assets then a Liquidator will be appointed to finish realising those assets and then pay a dividend to unsecured creditors.
What’s the difference between Administration and Administrative Receivership ?
If the lender’s floating charge security is dated after 15 September 2003 then they will not be able to appoint an Administrative Receiver but they can still appoint an Administrator. Whilst an Administrative Receiver’s primary duty is to their appointor, an Administrator is an Officer of the Court, whose duty is to all creditors no matter who appointed them.
What other types of Receivership are there ?
In addition to Administrative Receivership you may encounter Fixed Charge Receivership, Agricultural Receivership and Court Appointed Receivership.
Fixed Charge Receivership is a process where the holder of a fixed charge over a specific asset appoints a Receiver to sell that asset only. The other assets of the company are left untouched. Where the appointment is over a property the Fixed Charge Receivership is often called an LPA Receivership after the Law of Property Act 1925.
Agricultural Receivership need not involve an IP. The lender, who must hold an agricultural charge, appoints a person to take control of the specific assets charged by the farmer. The law that it relates to is the Agricultural Credits Act 1928. An Agricultural Receiver cannot be appointed over a company’s assets.
Court Appointed Receivership happens where it is the Court appoints a person, again not necessarily an IP, to take charge of certain assets. This usually follows a legal dispute. It is not strictly an insolvency process. Receivers may also be appointed by the Court under various statutes; such as the Proceeds of Crime Act.
Something we’ve not covered yet ? Send us a query via our contact page and we’ll answer you and add it to this section too.