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Who is the Official Receiver and what is their role in a liquidation process?
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Who is the Official Receiver?
The Official Receiver (OR) is a civil servant working on behalf of the Insolvency Service, but is also an officer of the court. Once a company is placed into compulsory liquidation, an Official Receiver is immediately appointed to begin administering the initial stages of the liquidation.
In some situations, the Official Receiver passes the liquidation case over to an insolvency practitioner, although they may decide to keep hold of the case and handle the whole liquidation themselves. Much of this will depend on the complexity of the liquidation.
The Official Receiver is accountable to both the courts and to the Secretary of State for the Department for Business, Energy and Industrial Strategy (BEIS), and their role varies depending on the circumstances of each insolvent company facing liquidation.
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A provisional liquidator is required in some insolvency cases, from the time a winding-up petition is presented to the courts. This can occur if the petitioning creditor believes that company assets might be sold, or that another creditor may be treated preferentially by the debtor company.
As provisional liquidator, the Official Receiver is responsible for safeguarding company assets and records until the winding-up hearing. If a winding-up order is subsequently granted by the court, the Official Receiver will report to creditors and shareholders on the company’s assets and liabilities. They may also make a report to court if necessary.
If there are sufficient assets of value available, the Official Receiver may request the Secretary of State to appoint another liquidator, or ask that creditors do so via a creditors’ meeting.
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If no other liquidator is appointed by the Secretary of State or company creditors, the Official Receiver will remain in office and administer the process. This involves identifying the assets to be sold, arranging for their valuation and sale, and distributing the proceeds equitably among creditors using the statutory hierarchy.
Part of their role as liquidator is to decide whether to complete any outstanding contracts, and they may decide to consult with the company’s main creditors before making this decision.
When a company is liquidated, the Official Receiver takes on an investigative role. They may interview directors to establish the circumstances that led to the company’s insolvency, or request that the directors complete a comprehensive questionnaire.
Essentially, the Official Receiver must find out whether there were any instances of wrongful trading or fraudulent activity that caused the company to fail. There is a responsibility to creditors and the wider public to penalise directors who cause financial loss, whether deliberate or due to a lack of care.
Even when a private insolvency practitioner has been appointed to administer the liquidation process, the Official Receiver’s role as investigator carries on. During their investigations the Official Receiver’s office will scrutinise the company’s financial records as well as interviewing directors, and also making other enquiries with third parties such as the company’s bank and accountant.
If they discover previously undisclosed assets, but are no longer office-holders themselves, the liquidator will be informed of the situation.
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As part of the investigations, the Official Receiver will need to build up a complete picture of the events leading up to the company becoming insolvent. In order to help this, they will ask a number of questions which are likely to cover:
- The nature and value of the company’s assets and liabilities, as well as details of the director’s own personal assets and liabilities
- The circumstances surrounding the company’s insolvency, particularly events leading up to the insolvency date
- Whether the minutes of any director meetings were kept, and the information that was recorded
- How creditors have been affected by the insolvency, and whether or not any financial losses could have been prevented by the director.
In essence, the Official Receiver will be trying to establish whether directors have acted wrongfully or fraudulently, and if they should have taken a different course of action at any point, to minimise losses for creditors.
The financial documents will be scrutinised by the Official Receiver, and retained by their office. Directors are free to ask questions about the investigation whilst at interview, to find out more about likely proceedings in the future.
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If you would like more information about the Official Receiver and their role in liquidation, Real Business Rescue can help. We have extensive experience of company liquidations, and with offices nationwide, you can take advantage of our free initial same-day consultation wherever your location.
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