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Administrative Receiverships

Administrative Receiverships

Administrative Receiverships are now extremely rare, due to a change in the law back in 2002. Where Administrative Receiverships do happen, they occur as a result of a creditor who holds a floating charge over the whole or substantially the whole of the company’s undertaking exercising its powers under the charge, and the Insolvency Act 1986, to appoint an Administrative Receiver.

The Administrative Receiver’s duty is primarily to the creditor appointing them, to realise the assets subject to the charge in order to pay the debt secured by it. This can include trading the company to maximise the realisations, selling the business as a going concern or selling off the assets individually.

Administrative Receivers can have a secondary duty to the company, and any other party who has an interest in any surplus funds available from the assets subject to the charge, but this secondary duty is limited to taking care to avoid preventable loss.

Once the assets have been realised to pay the debt to the secured creditor, the company is free to continue trading, though this may not be possible if the assets it needs to be able to trade have been sold off.

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