This is when a licensed insolvency practitioner takes control of the company.
The administrative receiver (sometimes abbreviated to receiver) decides whether to continue the business and attempt to achieve a going concern sale or shut it down.
Only the holder of a debenture can appoint, e.g. a bank. The receiver will realise the assets, specified in the debenture under which he was appointed, and will account to the debenture holder and preferential creditors for these funds after deducting his fees. Any balance of funds is returned to the company.
Directors can also ask for a receiver to be appointed, for instance to avoid the risk of wrongful trading.
Administrative Receivership is only available for limited companies, and not normal partnerships.
The receiver can carry on the company's business and sell the business and other assets comprised in the charge to repay the secured and preferential creditors.
Under the Enterprise Act (2002), the right of a debenture holder to appoint an Administrative Receiver was abolished for all debentures on or after 15 September 2003. This applied except in very specific circumstances related to Capital Markets, public/private partnerships, utility projects, finance projects, financial markets and registered social landlords.