Part III of Insolvency Act 1986
Most frequently used under the act apart from winding up and is a life saver for a company.
Usually involves attempt to dispose of Co as a going concern to new owners
An ADMINISTRATIVE RECEIVER can be appointed by the Court on application by Debenture Holders or other creditors
The Official Receiver can be made the Administrative Receiver of a Co.
A Receiver is normally appointed by debenture holders under powers written into the debenture which allows AR to be appointed without reference to the Court
It is a form of mortgage ~ secured on assets of the company
A charge which covers all Cos assets at any time. Normally issued by Bank,Financial Institution or another lender
Usually enforced quickly ~ within a 24hr period ~ without consultation with Co or its creditors
It is favoured by lending institutions whose loans are not met
The debenture holder is a secured creditor & has priority over unsecured creditors if AR recovers any money
AR must be Insolvency Practitioner and the AR acts as agent of Co at all times
The Insolvency Act lays down rules of conduct of the AR:
All creditors informed within 28 days of appointment
Inform all known suppliers of good & services of terms under which Co will continue to trade
Meeting of creditors called but this is purely a reporting mechanism
AR has no other duties to creditors other than to give information
Will pay only statutory trade & utility creditors for debts which arise during his appointment
The AR will continue to trade in Cos. name and the authority must continue to charge Co. & obtain LOs
If the authority was in Close or Walking possession prior to ARs appointment then action would be valid & goods could be sold
As AR is not required to notify anyone of his impending appointment ~ it is down to good fortune as to whether monies will be received.
The AR will conduct receivership under instruction of debenture holder and will recover whatever value he can by selling whole or part of business.
AR can dispose of all assets under the debenture ~ When AR realises maximum value - will vacate appointment
The Co often has no assets left & will go into liquidation
Any debts prior to receivership are frozen on appointment of AR
Co remains liable for all local taxes where applicable after that date until either vacation or liquidation
LA may apportion but only between Co before & after
As recovery usually impossible - debts normally written off
Ratford & Hayward (Receivers & Managers of Sabre Tooling Ltd) v Northavon D.C. 1986
Court held that as receivers were appointed under the debenture as agents of the Company, they could not be held to be in rateable occupation of the Cos premises.
The Co remained in occupation & must therefore be liable for rates during the time of the receivership
Case attained 'classic' status & is currently quoted By ARs when denying liability
DLUHC currently looking at legislation & it's effect on NDR
Paramount Judgement 1995
House of Lords
Confirmed that ARs are responsible for payment of redundancy costs to certain staff who are made redundant during receivership.
Prior to this case receivers had construed the Act as allowing them to repudiate the contracts of staff made redundant, thus denying them redundancy payments which the company was contractually obliged to pay.
As redundancy costs are pre-preferential they have to be paid prior to the debenture holder.
Means that banks may not get their money as they take second place
This may stop ARs being so popular ~ Central Government may alter legislation
