Administrative Receivership
What is Administrative Receivership?
Administrative receivers are normally appointed by a bank or other
lending institution which has as security for a loan (under a floating
charge) the whole, or substantially the whole, of a company’s property.
This is often abbreviated simply to Receivership. The ability to appoint
normally arises when the company is in default or in breach of the terms
of its borrowing.
The charge is contained in a document known as a debenture, which will
frequently also include fixed charges and the lender is often referred
to as a debenture holder. This does not have to be just one bank; it
could be, and often is, a consortium of banks or other lenders.
The administrative receiver has similar powers to an administrator. He
can continue to operate the business, and often does, whilst trying to
sell it as a going concern. If he manages to do this he will usually
achieve a higher price than if the company’s assets were disposed of on
a break-up basis.
It should be noted that an administrative receiver has no authority
to deal with the claims of unsecured creditors (e.g. trade creditors).
If sufficient funds become available for distribution to the general
body of creditors they must be dealt with by a separately appointed
liquidator.
It is no longer possible to appoint an administrative receiver under a
security instrument created after 15 September 2003. Instead, creditors
with floating charge security can appoint an
administrator.
For more information about Receivership, contact us.