Administrative receivers primary duty remains the realisation of assets used as security, for a secured loan.
- Comparisons connecting an administrative receivership and administration? Administrations remain more prevalent as secured creditors may appoint if they hold a form of security, including a debenture. Registration of debentures had to be filed before September 15th, 2003, being the cut-off point.
A debenture remains a standard process of obtaining security, under which a lender retains a “fixed and floating charge” over assets and undertakings of the company.
For further reading, click on ‘‘section 251 of the Insolvency Act 1986, section 29(2)‘.
It offers lenders a safe option with the underpinning of security for a loan advanced.
To challenge an LPA Receiver appointment requires you to keep your lender up to date with any issues, and try and keep the lender contented with their exposure. Failing which they will appoint to realise their loan.
Assume the company has now breached the terms of its banking or loan facilities. Therefore, please contact HBG Advisory to discuss your options before the lender acts.
A receiver appointed specifically under a fixed charge generally has more limited powers, as they can only deal with the fixed charge property and not the business generally.
For further reading on companies in distress, please view’recovery of your company financially‘.
The distinction between unsecured and secured creditors.
Administrative Receivers – A fixed charge receiver
A fixed charge receiver referred to as an LPA receiver. Is where a receiver is appointed (Law of Property Act 1925) to take back control of the property where the borrower has defaulted on the terms of its loan.
Law of Property Act (LPA) receiverships differ from an administrative receivership, in that they are not a “FORMAL” insolvency process.
LPA receivers remain appointed where the borrower has failed to repay a loan. They may also be appointed where there have been other breaches of the loan, for example, a breach of the loan to value covenant. The fixed charge receiver remains empowered to manage the business at the property and to distribute all income generated by the defaulting business to the lender.
What are the Advantages of Administrative Receiverships?
The appointed administrative receiver may turn the company around if required as to powers they have. Often contemplated is the company is viable, but lacks poor controls or suffered bad debts causing the main problem.
The appointment also protects the appointing creditor from any potential losses on their loan, while perhaps securing funds for the companies other creditors.
What are the disadvantages of Administrative Receiverships?
Disadvantages with administrative receiverships prompted changes effected in September 2003.
The primary recipient of any advantage for their appointment is the creditor who appointed them. Once they have achieved their primary aim for the creditor, then these companies often have little if any monies or assets left for the remaining creditors left exposed. Usually, company failure follows, leaving former employees without jobs and unsecured creditors unpaid.
For further help on administrative receiverships and the available options to consider. Please contact HBG Advisory on FREEPHONE 0800 612 5448 or arrange a FREE, confidential meeting by booking a virtual appointment with a member of our team.