Administrative Receivership
What is it?
It's a lender-driven process, only available if there is a debenture on the company, dated prior to 15th September 2003. An insolvency practitioner, the administrative receiver, is appointed by the lender to take executive control of the company. His role is to realise assets in order to repay the lender. This is typically achieved by the sale of the business as a going concern or by the piecemeal realisation of its assets.
Who is it for?
Businesses which have become insolvent and where no other rescue or
refinance options are available within the timescales required.
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The Process
The directors may invite the debenture holder to appoint an administrative receiver, however the lender has the right to appoint one if specified triggers or covenants contained within the debenture are breached.
Advantages
- The appointment is swift, requiring only the signing of the appointment document by the debenture holder.
- It can be utilised to effect a swift change of ownership, thus minimising damage to the company's goodwill.
- The process has certain tax advantages and can be a cheaper process than that of administration.
Disadvantages
- The shareholders and all directors may lose control of the business when it is exposed to the open market to maximise realisations for the debenture holder.
- As the process is driven by one class of creditor there is a perception that actions may be taken which are not necessarily in the best interests of the remaining classes of creditor.
Other Options available
Administration , Company Voluntary Arrangement (CVA) , Equity Investment, Informal Creditor Agreement , Sale of business, Law
of Property Act receivership
Call us on 0800 195 4585 to discuss if 'Administrative Receivership' is appropriate for you.
