Administrative Receivership
At Campbell Crossly & Davis, we understand that financial distress can be one of the most challenging situations a company will ever face. When debts secured against company assets cannot be repaid and the creditor decides to take action, receivership may be the outcome. This process is often fast-moving, complex, and potentially final for the business involved. Our role is to guide you through it, protect your interests, and, where possible, find a route to survival.
What Is Receivership?
Receivership is a legal process in which a receiver is appointed to take control of certain or all company assets on behalf of a secured creditor. The aim is to realise those assets in order to repay debts. It is commonly triggered when a company has a secured debt it cannot service, particularly where that debt is backed by a floating charge or other form of security.
The receiver may be appointed privately by a charge holder or through the court. In both scenarios, the appointed individual is usually a licensed insolvency practitioner with specialist expertise in managing the business, safeguarding assets, and acting in the interests of the secured creditor.
Types of Receivership
There are several types of receivership recognised under UK law, each with different implications for a company:
- Administrative Receivership – This occurs when an administrative receiver is appointed over all or substantially all of a company’s assets and operations, usually under a qualifying floating charge created before the Enterprise Act 2002 came into effect. Administrative receivership gives the appointee wide powers to manage the company, sell the business, or close divisions. Although the procedure has been restricted since 2003, it still applies where older security agreements exist.
- Fixed Charge Receiverships – These involve a receiver appointed over specific assets, such as property or equipment, secured under a fixed charge. Commonly referred to as Law of Property Act receiverships, they focus on protecting and realising the particular asset for the benefit of the secured creditor, often through sale or income collection.
- Court Appointed Receivers – In certain circumstances, the court will appoint a receiver, often where there is a need to protect assets in dispute, safeguard property in complex legal matters, or enforce security rights in specific cases.
Why Companies Enter Receivership
Receivership is generally the result of serious financial difficulty. This could stem from sustained cash flow problems, an inability to service secured debt, or a breach of loan terms. For some businesses, external factors such as the loss of a major contract, economic downturn, or operational failures push them towards default. In other cases, shareholder disputes or strategic mismanagement may cause secured creditors to take decisive action.
When a creditor believes its position is at risk, it will assess whether appointing a receiver is the most effective way to recover its debt. If viable solutions cannot be agreed upon with the company, the receiver is appointed, and the process begins.
The Role of the Receiver
Once appointed, the receiver assumes control of the company assets covered by the security. In an administrative receivership, the administrative receiver will manage the business with a focus on maximising returns for the appointing secured creditor. This could involve selling the business as a going concern, disposing of individual assets, or restructuring operations to continue to trade temporarily.
The receiver’s duties may also include:
- Securing and protecting assets
- Managing company operations to preserve value
- Collecting income from property or other assets
- Meeting the claims of preferential creditors before repaying the secured creditor
- Investigating the conduct of company directors and reporting to the relevant authorities
In a fixed charge receivership, powers are limited to the specific asset subject to the charge, but may still include selling the asset or collecting income from it until the debt is repaid.
Receivership Process and Legal Framework
The process begins when a charge holder, usually a bank or financial institution, exercises its rights under a security document. If the debt is secured against a floating charge created before the Enterprise Act 2002 restrictions, an administrative receiver can be appointed. For fixed charge assets, the creditor may appoint a fixed charge receiver under the Law of Property Act 1925. In more complex or disputed matters, court-appointed receivers may be used.
Once in place, the receiver will develop a strategy to realise the assets and repay the secured debt. Where possible, they may opt to continue to trade the business to maintain value before selling the business or its assets. However, in many cases, especially where there is significant financial distress, the outcome is the sale of assets and eventual dissolution of the company.
Receivership vs Administration and Liquidation
Receivership differs from administration in that the receiver’s primary duty is to the appointing secured creditor, not the body of creditors as a whole. In administration, an insolvency practitioner seeks to rescue the company where possible, with a moratorium on creditor actions to allow breathing space.
It also differs from liquidation, which is the formal process of winding up a company’s affairs and distributing its assets to creditors in a set order. While receivership may lead to liquidation, it can also result in a business being sold as a going concern or returned to its directors if the debt is resolved.
Impact on Directors and Employees
When a receiver is appointed, directors lose control over the assets covered by the appointment. In an administrative receivership, this often means the receiver takes over day-to-day operations. Employees may continue to work if the receiver decides to continue to trade, but redundancies are common if assets are to be sold quickly.
Preferential creditors, such as employees owed wages and certain HMRC debts, are paid from floating charge realisations before the secured creditor receives payment.
How Campbell Crossly & Davis Can Help
At Campbell Crossly & Davis, we work with companies, directors, and stakeholders to navigate the challenges of receivership. Whether you are facing the threat of a receiver being appointed or are already in the process, our team can provide expert guidance. We can:
- Advise on your legal and financial position
- Engage with secured creditors to explore alternatives
- Develop restructuring plans to improve cash flow and avoid enforcement
- Support directors through investigations and reporting requirements
Our aim is always to protect your interests, mitigate risks, and, where possible, preserve the future of your business.
Taking Action Early
The earlier you act when facing financial difficulty, the more options are available. If your company has secured debt and is at risk of enforcement by charge holders, engaging professional advice promptly can make the difference between survival and closure.
At Campbell Crossly & Davis, our licensed insolvency practitioners are ready to help you understand your position, explore alternatives to receivership, or manage the process in a way that safeguards as much value as possible.
Contact Us
If you are concerned about the possibility of receivership or need urgent advice because a receiver has been appointed, contact Campbell Crossly & Davis today. Our expertise in insolvency and restructuring means you can rely on us to guide you through every stage with clarity, professionalism, and a focus on achieving the best outcome for you and your business.
For further information, please contact a member of our team on 01253 349331
This note is meant as a brief overview of Administrative Receivership. It is not a detailed review and further detailed advice should be taken before coming to any decision. No responsibility can be accepted by Campbell Crossley and Davis, its partners or employees for any loss occasioned by any person or persons acting or refraining from action as a result of material contained in this note.
