An Administrative Receivers Powers and Duties

Government sentiment has moved against the concept of an administrative  receiver, as such a receiver holds allegiance only to one party - the debenture holder who appointed that receiver.

In June 2001 the Department of Trade and Industry announced the intention to legislate in due course to abolish the concept of an Administrative Receiver. The law that then came into effect on the 15th September 2003 only abolishes the power to appoint Administrative Receivers however, if the debenture was created after that date.

A receiver is a very powerful animal. He:

• may dismiss directors and other employees

• has sole responsibility for management

• may close down a business with immediate effect or choose to continue trading

• abandon contracts

• sell the business

The priority aim of the administrative receiver is to raise sufficient cash to repay his appointor (the debenture holder) in full.

The administrative receiver has no duty to act in the best interests of creditors generally as his main aim is to satisfy his appointor.

A receivership is usually followed by a liquidation. The liquidator, a separate person, examines the validity of the appointment of the administrative receiver and the receivers actions to see if such actions were appropriate.