What is it?
Administrative receivership is a lender-driven process, only available if the lender holds a debenture issued by the company, dated prior to 15th September 2003. An insolvency practitioner is appointed by the lender to take executive control of the company and the assets subject to the debenture holder’s security. 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 Administrative Receivership for?
Now little used. Sometimes used by debenture holders to effect a hostile appointment. Can be a consentual appointment.
How can Chamberlain & Co help?
The company or debenture holder will need to instruct an insolvency practitioner such as Chamberlain & Co to advise upon the most appropriate course of action. If administrative receivership is the chosen option a licensed insolvency practitioner from Chamberlain & Co can be appointed as the administrative receiver.
The directors may invite the debenture holder to appoint an administrative receiver, however the lender has the right to appoint one if specified triggers occur or covenants contained within the debenture are breached.
Advantages of Administrative Receivership
- 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 administrative receivership process has certain tax advantages and can be a cheaper process than administration.
- The shareholders and 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.