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Administrative Receivership is a non-common practice these days but is an insolvency process whereby a lender with a secured charge appoints a receiver to take control of the company assets.
The receiver will then proceed to sell and recover the creditors’ debts. If necessary, this may include the sale of the company itself.
The receiver will only deal with the fixed charge and not the general day to day business. Only lenders who had a floating charge before 15th September 2003 can put that company into administrative Receivership.
There are some similarities between Administration and Administrative Receivership but administrations are now more common practice. A secured creditor can only appoint an administrative receiver in circumstances where a breach or default has been made, and they hold a security.
The receiver is the only one at this stage to decide if it’s profitable and best practice to keep the business trading, sell its assets, or sell the business in its entirety. These decisions are made on the current state of the company.
The receiver has control over the company’s employees and directors, which could result in dismissals.
In the event of the receiver making a deal with the directors, the receiver will investigate the business’s practices and processes; finalising a report at the end.
The business and all assets can then be advertised for sale to maximise returns of the lender. Upon a purchase, paying off the debt to the receivers’ secured creditors and employees will be first.
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