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Also, unless other commercial contracts made by the company provide otherwise, the appointment will not affect those contracts which will remain binding. This includes contracts of employment which the rules provide will not be affected unless they are incompatible with the Administrative Receiver’s powers. Prior to the implementation of the Enterprise Act 2002, Administrative Receivership was the primary remedy for holders of security over substantially all of a company’s assets. However, the 2002 Act significantly reduced the right of a secured creditor to appoint an Administrative Receiver, when it effectively abolished Administrative Receiverships for all charges registered after 15 September 2003.
There is now a general prohibition on such appointments, except in certain specific circumstances. The prohibition does not extend to floating charges granted before 15 September 2003 when the 2002 Act took effect. However, that is way more than twenty years ago now, meaning that Administrative Receiverships are much less common (and you may never see one in your career).
Secured creditors may now only appoint an Administrative Receiver if the floating charge was created before 15 September 2003 and/or if the creditor falls into one of the statutory exemption categories, which include:
Unless the creditor falls within one of these statutory exemptions, section 72 of the Insolvency Act 1986 as amended, prohibits a qualifying floating chargeholder from appointing an Administrative Receiver.
Instead, a chargeholder can put a company into Administration.
[See ‘Administration’, ‘Limited Company’, ‘PLC’, ‘Floating Charge’, ‘Qualified Floating Chargeholder’, ‘Debenture’, ‘Crystallise’, ‘Administrative Receiver’, ‘Enterprise Act’ and ‘Insolvency Act’.]
