Administrative Receivership Not to be confused with Administration, an administrative receiver is appointed by a floating charge holder, normally a bank. Typically a company finds itself with serious cash flow problems having borrowed against a business plan that has not worked. The problems are reported to the bank that will request further data. The directors may well find it difficult to produce this information. As time goes by, the companies overdraft is constantly at its limit as monies owed are slow to come in and cheques are bounced by the bank. The bank will call for a ceiling on borrowing and take this as a sign that the company is out of control. The bank will then: Seek a reduction in its exposure. Request increased security, normally in the form of personal guarantees The bank may request new capital be introduced Request a new business plan May ask for investigating accountants to look at the business Seek the appointment of a receiver The receiver will ascertain what the future prospects of the company are and decide whether to sell some or all of the assets, the business as a whole or continue to trade whilst a better deal can be found. During the receivership process, the receiver will investigate the conduct of the directors and file a report with the Department of Trade and Industry. The company is rarely saved in its existing form, often jobs are lost and directors will lose their own employment and any monies owing to them. It is unlikely that the company’s unsecured creditors will receive any money back. Clearly the cost is extremely high The bank is likely to recover all of its money with preferential creditors seeing their debts repaid by the receiver. Previous page