What is administrative receivership?

15 June 2014

When a company borrows money, the lender usually has some security over its assets to ensure the money is repaid. If the company does not keep to the terms of the loan, or suffers financial difficulties, the lender may appoint their own Administrative Receiver (an IP). However, an administrative receiver can now only be appointed in relation to a charge created before September 2003.

The administrative receiver’s principal aim, however, is to get back the money the company owes to the secured creditor. The administrative receiver may sell company assets individually, or the company as a going concern, to pay the secured creditor and the costs of the Receivership.

A company in administrative receivership is often said to be in receivership.

Receivership is defined as: When a company defaults on a loan or payment the debt holder can call on a receiver to go into the company to sell the companies assets in order to pay back some or all of the debt. The company in receivership will lose control of the business while the receivers sell the assets and the company will usually be liquidated, the business may be sold and there is usually a loss of jobs.

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