Administrative Receivership
Administrative Receivership is a formal insolvency procedure initiated by a floating charge holder (“secured creditor”). In the majority of cases, a bank will appoint an Administrative Receiver where they have doubts regarding a company’s ability to repay sums that are due and owing to them. The secured creditor must hold a valid floating charge over all, or substantially all, the assets of a company.
An Administrative Receiver will have extensive powers to deal with the company’s charged assets under Schedule 1 of the Insolvency Act 1986. Any appointed Administrative Receiver will be authorised to trade the company’s business and dispose of its assets, either on a break up basis or going concern, in order to satisfy the secured debt.
A company can be in Administrative Receivership and Liquidation at the same time. However, the appointed Liquidator will not be permitted to deal with the company’s charged assets without the authorisation from the appointed Administrative Receiver. A creditor may also continue or begin any legal action against the company, including petitioning for its Liquidation, whilst it is in Administrative Receivership. If you are considering this, you should think carefully whether you would benefit from doing so.
The appointment of an Administrative Receiver does not necessarily result in the company ceasing to trade or being placed into Liquidation. A company may have sufficient assets to satisfy the Secured Creditor in full, resulting in the Receiver ceasing to act and the directors regaining full control of the company.
Administrative Receivership was effectively abolished under the Enterprise Act 2002. Subject to limited exceptions, a secured creditor is no longer authorised to appoint an Administrative Receiver where a floating charge was created on or after 15 September 2003. This does not prevent a secured creditor from appointing an Administrator in respect of a floating charge created before or after 15 September 2003.
You may be able to avoid your company from entering Administrative Receivership. However, this will depend on what stage the Administrative Receivership is at and the attitude of the secured creditor. If your company has breached the terms of its banking or loan facilities, it is highly advisable that you contact us as soon as possible to discuss the options available to you.
Fixed Charge Receivership
In certain circumstances, a Fixed Charge Receivership may be a suitable single asset enforcement strategy, especially where ongoing trade and management/company cooperation is not required. A Fixed Charge Receiver may also be referred to as a Law of Property Act Receiver (“LPA”) where they are appointed under the Law of Property Act 1925 to take control of property where a borrower has defaulted on its loan terms. A LPA Receiver is commonly appointed where a borrower has failed to repay a loan, it can also occur where there have been other breaches of a loan, for example, a breach of the loan-to-value covenant.
As an agent of the borrower, the Receiver’s powers will limited to the sale of the asset over which they are appointed and the collection of rent. All other powers, if any, will be detailed in the charge document. A Fixed Charge Receiver has no statutory protection (“moratorium”), although once appointed, they will be entitled to secure any fixed assets they are appointed to deal with. Unlike an Administrative Receiver, a Fixed Charge Receiver will have no power to require cooperation from the company’s directors.
Contact Our Team
If your company is experiencing financial difficulties, we can work with you to identify the most appropriate solution. We have helped companies of all sizes across many different sectors. We understand that being pursued for unpaid debts is a hugely stressful time. Contact us today on 0800 061 4002 should you require any further information on Administrative Receivership and the options that may be available to you. If Administrative Receivership is considered the best solution, we can be appointed as Administrative Receiver.