When companies borrow money, it is often the case that they will offer some security to the lender, usually a bank. This security is usually in the form of a mortgage or debenture over some, or all, of the assets of the company. If the company fails to keep the terms of the loan or encounters financial difficulties, the lender may be entitled to appoint someone to recover the outstanding debt, administrative or business receivership. Where this person is appointed under the terms of the security, they are referred to as an administrative receiver. An administrative receiver is an insolvency practitioner who has control of the whole, or a substantial part, of the company’s property and wide powers over the business. The exact nature of these powers will be outlined in the terms of the debenture.
The administrative receiver is mainly concerned with getting back the money owed to the secured creditor. The administrative receiver may sell the assets piecemeal, or sell the whole business as a going concern to pay off the secured creditor, and the costs of the receivership.
Since 15 September 2003 the right to appoint an administrative receiver is generally limited to debenture holders whose charge existed at that date.
If you would like further information on business receivership or would like to discuss your options please call 01709 331300.