Definition
An administrative receiver is a type of receiver appointed by the holder of a floating charge that covers the entire, or substantially all, of a company’s assets. An administrative receiver has the authority to sell the assets secured by the charge or to continue the company’s business operations to meet obligations to creditors.
Examples
Manufacturing Company: A bank holds a floating charge over a manufacturing company’s machinery, inventory, and other assets. Due to the company’s inability to meet its loan obligations, the bank can appoint an administrative receiver to manage the business and liquidate assets to repay the debt.
Retail Chain: A lending institution with a floating charge over a retail chain’s stock and shop leases appoints an administrative receiver when the company faces financial difficulties. The receiver may either sell off the assets or continue trading to maximize returns for the charge holder.
Frequently Asked Questions
What is the role of an administrative receiver?
An administrative receiver is responsible for managing the assets covered by a floating charge, which may include selling assets or continuing to operate the business, with the intention of repaying the debt owed to the chargeholder.
Can an administrative receiver be appointed today?
No, subject to certain exceptions, an administrative receiver cannot be appointed for floating charges created after 15 September 2003. However, the holder of such a charge can appoint an administrator without requiring a court order.
What is a floating charge?
A floating charge is a type of security interest over a fund of changing assets of a company or certain types of non-corporate entities. This fund of assets will be often stock-in-trade, raw materials, work in progress, and cash in bank.
What is the distinction between an administrative receiver and an administrator?
An administrative receiver is appointed primarily by a floating charge holder and focuses on realizing secured assets for the chargeholder. In contrast, an administrator can be appointed by various parties (including the company itself) and aims to achieve a better outcome for all creditors under a formal insolvency protocol.
What limitations impact the appointment of an administrative receiver?
The Enterprise Act 2002 introduced limitations prohibiting the appointment of administrative receivers for floating charges created after 15 September 2003, except in certain specific cases.
Related Terms
Floating Charge: A security interest over a pool of changing assets of a company, which “floats” until it crystallizes into a fixed charge upon a default event.
Administrator: A person appointed to manage the affairs, business, and property of a company for achieving a better outcome for creditors compared to liquidation.
Receiver: Generally, any person appointed to manage or sell certain company assets pledged as collateral. The term includes both administrative receivers and simpler forms of receivers.
Online References
Suggested Books for Further Studies
- Insolvency Law: A Guide for Directors and Managers by Weeramantry, Rohan.
- Debt Restructuring and Modern Financial Techniques by Melissa Borrelli.
- Corporate Insolvency Law: Perspectives and Principles by Vanessa Finch.
Accounting Basics: “Administrative Receiver” Fundamentals Quiz
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