Beer & Young ADR, Administrative Receivership

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Administrative Receivership (ADR)


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Administrative Receivers can be appointed by a Qualifying Floating Charge holder (QFC)

Who holds a Floating Charge over the whole or substantial part of the company's assets

And

The Charge was created prior to 15 September 2003

Administrative Receivers are normally appointed by a Bank or other lending institution or by a consortium of banks.

The Administrative Receiver can and often does operate the business whilst trying to sell it as a going concern. Selling as a going concern (which is also available in an Administration) usually achieves a higher price that if the company's assets were disposed of on a break-up basis

An Administrative Receiver has no authority to deal with the claims of unsecured creditors and if the Administrative Receiver realises assets which exceed the amount due to any preferential creditors and to the secured creditor, a Liquidator will normally be appointed who will distribute the surplus to the unsecured creditors Administrative Receivership was a popular procedure with Lenders until the introduction of the Enterprise Act 2002 in September 2003, the intention of which

Is to take the first steps towards the eradication of the floating charge

And

To encourage wider use of the Administration procedure. The Enterprise Act 2002 streamlined the Administration procedure to facilitate this

The number of Administrative Receiverships has declined substantially and will eventually be phased out altogether when there are no longer any pre-Enterprise Act (15 September 2003) floating charges in existence.

The other types of Receivership remain unaffected by the Enterprise Act 2002.

Summary of ADR Procedure

The Lender	This procedure is available only to a Lender with Floating Charge security granted prior to 15 September 2003
Default	The Lender can appoint an Administrative Receiver when the borrower is in default of or in breach of the terms of the security document. The appointment of a Receiver usually follows a demand for repayment
Acceptance of Appointment	The Receiver must formally accept his appointment
The Receiver	The Receiver then notifies Companies House, the Company itself and its creditors. The Receiver must also advertise his appointment in The London Gazette and an appropriate newspaper
Realisation of Assets	The powers and the capacity of the Receiver depend upon the security document which should be referred to in all cases. The security document would normally enable the Receiver to carry on a company's business and realise its assets. Whilst in office, the Receiver acts as the agent of the company until liquidation
Creditors Report	Within three months of his appointment, the Receiver must send a report to the creditors and convene a Creditors Meeting to receiver the report. If, in the meantime, the company has gone into liquidation, the report need only go to the Liquidator
Conclusion of Receivership	The receivership is concluded and the Receiver ceases to act in office when he has realised the security, repaid any preferential creditors (if possible) and the appointer and Companies House are notified.

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