A secured creditor (such as a bank, director or supplier) may appoint an Administrative Receiver (a licensed insolvency practitioner) to take control of the company when its unable to re-pay the secured creditor its loan and interest (so breaching loan terms).
The creditors original security / protection for providing the loan will have been detailed in a floating charge debenture agreement with the company (using collateral such as stock, WIP, un-factored debtors, fixtures & fittings, cash or assets not subject to fixed charges). All debenture charges are filed at Companies House.
When such an instruction is made, it is called Administrative Receivership or simply Receivership. The Administrative Receiver has the option to trade whilst a purchaser is found for the business and its assets
When the floating charge is paid in full or the Administrative Receiver has sold all the assets and distributed the proceeds, then the Administrative Receivership is complete.
Administrative receivership is now rare due to The Enterprise Act 2002 which focuses on company restructuring as opposed to closure. It effectively stopped floating charge holders from appointing Administrative Receivers, subject to some exceptions.
Can you stop an Administrative Receivership?
If before the date of Receivership, the debt is paid or alternative payment arrangements are made with the secured creditor.
Call 0121 201 1720 for more advice including re-financing.
*Administrative Receivership should not be confused with the insolvency process of company administration, which is aimed at company recovery and the now preferred insolvency option.
