An administrative receiver is usually appointed by a bank or other lender which has the major part of the company's assets as security for a loan. It is necessary to check the details of the debenture to verify that it authorises the appointment of an administrative receiver in the circumstances that have arisen. Our insolvency practitioners will be able to assist you in confirming this.

The administrative receiver's prime objective is to recover the value of the lender's security, and for this purpose, has the power to carry on a company's business and realise its assets. The administrative receiver acts as the agent of the company unless and until it goes into liquidation.

Directors do however retain control of any assets which are not covered under the terms of the debenture by which the administrative receiver was appointed. It is very often the case that the majority of the business of the company, can be sold, as this is likely to raise more money for creditors than selling off the assets piecemeal. The company (simply a legal entity) will subsequently be liquidated, along with any remaining assets, for the benefit of other (preferential and unsecured) creditors.

Note: Holders of floating charges created on or after 15th September 2003 will no longer be able to appoint an administrative receiver. But, on the basis that the charge holder has a qualifying floating charge, they can use this to appoint an administrator - see section on Administrations for more detail.