Administrative Receivership

An administrative receiver is appointed by the holder of a floating charge created before 15 September 2003 (and certain limited types of charge after that date) to enable the realisation of the secured property and the discharge of the secured obligations.

Topic

Summary
What is the nature of the procedure?

A remedy of a secured creditor to allow for the realisation of assets subject to security. Administrative receivership is essentially a contractual remedy, but an administrative receiver also has statutory powers.

Who can commence the procedure?

Before 15 September 2003 (the date the Enterprise Act 2002 came into force) any creditor who had a floating charge over the whole (or substantially the whole) of the property of a company could appoint an administrative receiver (provided the charge had become enforceable).

From 15 September 2003, only:

  1. the holder of a floating charge over the whole (or substantially the whole) of the property of a company created before 15 September 2003, or
  2. a "qualifying floating charge holder" where one of the statutory exceptions applies (eg a capital markets or financial markets arrangement, a public-private partnership, a utility project, an urban regeneration project, a project financing etc)

can appoint an administrative receiver.

Are there any corporate thresholds?

N/A.

Is there a moratorium?

No, the appointment of an administrative receiver does not create an automatic statutory moratorium so creditors may begin and continue legal action against the company, including petitioning for its liquidation.

Who is in charge? The administrative receiver, who must be a licensed insolvency practitioner.
How are they selected, including voting thresholds?

The charge holder will select the administrative receiver it wishes to appoint.

Is there a plan? Who votes and what are the thresholds?

There is no plan. However, the administrative receiver notifies all known creditors of the appointment within 28 days. Within three months, the administrative receiver must send a report to the registrar of companies and the secured creditors of the company or their trustees including details of:

  1. the events leading up to his appointment,
  2. how company property has been, or will be, disposed of,
  3. how the business has been carried on,
  4. the amounts payable to the charge holder who appointed him,
  5. the amounts payable to preferential creditors, and
  6. the amount (if any) likely to be available for the payment of other creditors.

A meeting of unsecured creditors is also held within three months of the appointment.

 What can the plan do?
N/A. An administrative receiver has extensive powers to deal with the charged assets. The principal duty is to realise property of the company to repay the charge holder. The administrative receiver will decide whether to carry on the business of the company or sell the business either as a going concern or on a break-up basis.
If not approved by the necessary majorities, can the plan still be approved? N/A.
What is the exit route? The administrative receivership is complete when the charge holder has been paid in full or the administrative receiver has sold all the property and distributed all the proceeds. In the unlikely event that the company continues, management of the company will be handed back to the directors, however administrative receivership usually ends up in the sale of the business and the dissolution or liquidation of the company.
What is the priority of payments?
  1. Costs
  2. Fixed charge realisations to the charge holder
  3. Preferential creditors
  4. Floating charge realisations to the charge holder
  5. Any surplus to the company or a liquidator
Is there a creditors committee? A creditors' committee may be appointed at the meeting of creditors and must consist of at least three and no more than five members. The creditors' committee has only a very limited role.
How involved is the court?

The court is not involved.

How is the administrator paid? The charge holder agrees the administrative receiver's fee. A liquidator, if one is appointed, will review the administrative receiver's fee and could apply to the court to challenge it.
Are there any general comments on the use of this procedure?

One of the reasons that the Government has restricted the circumstances in which an administrative receiver can be appointed is the non collective nature of the procedure. An administrative receiver owes a duty only to the charge holder rather than the creditors as a whole.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.