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Northern Ireland Company Guide to Administrative Receivership

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Northern Ireland Company Guide to Administrative Receivership

If your company has breached the terms of a debenture (loan agreement) in Northern Ireland that is secured by a floating legal charge created before 15 September 2003 then your business could be in danger of being put into administrative receivership. Continue reading to learn how we can help you save your business and its assets.

With 55 offices stretching from Inverness down to Exeter, Real Business Rescue can offer unparalleled director advice across the UK. If you need answers fast and don't feel like reading our detailed guides then feel free to call us (0800 644 6080) or send us an email for a free consultation. We'll attentively assess your situation and help you decide upon the most suitable course of action based on the unique circumstances of your case.

What is Administrative Receivership?

Administrative receivership in Northern Ireland is a formal insolvency procedure in which the holder of a debenture that contains a floating legal charge (a lender, typically a bank or other financial institution) appoints a receiver to take control of the assets of company that has breached the terms of the loan agreement. The appointed receiver then sells enough of the company's assets to repay the debenture holder.

If the company has enough assets to cover the cost of the debt then it may be able to emerge from administrative receivership and continue operating as a going concern. If, however, the company is deemed insolvent (having debts that exceed the combined value of all assets) and an arrangement cannot be reached, then the proceeding would end in the dissolution of the business.

It should be noted that an administrative receiver can only be appointed under a security instrument that was created before 15 September 2003. Any debenture holder attempting to collect a delinquent debt under a debenture created after that date would instead use company administration as a means of enforcing a floating legal charge.

What Are The Main Steps Involved in the Administrative Receivership Process?

  • A bank, financial institution, or lender who holds a floating legal charge as a security on a breached debenture agreement may take legal action against the borrower by exercising their express right to appoint an administrative receiver. Usually the lender will issue a statutory payment demand as a last-chance effort to collect the debt before resorting to appointing a receiver.

  • The lender will instruct a licensed insolvency practitioner to act as administrative receiver on their behalf. Usually banks have their own teams of IPs and accountants that they use to handle proceedings like this, but some financial institutions and private lenders will appoint an IP that works at an external firm. Upon appointing a receiver, the lender will notify Companies House and the appointed receiver will notify the indebted company's members and creditors. At this point the receiver will also advertise a notice of their appointment in the London Gazette and at least one other newspaper that is distributed in the region that the indebted company operates in.

  • The receiver assumes control over the indebted company's business affairs and assets and begins the process of raising funds for the lender that appointed them. They can choose to continue operating the business and fully devote all income to repayments, liquidate the company's assets individually, or sell the entire company as a going concern. 

  • Within three months of being appointed the receiver must issue a report to the company's creditors and convene a creditors' meeting. If a liquidator is appointed within that timeframe then the report would only be issued to the appointed liquidator, who would then present it at the creditors' meeting that will precede the company's liquidation.
     
  • The receiver has finished their duties and will notify Companies House that administrative receivership has ended once they have successfully realised the funds needed to repay the appointing lender. It should be noted that the receiver is not responsible for carrying out liquidation and repaying unsecured creditors. They're only given the task of collecting enough to repay the lender that appointed them. Therefore, if the company has enough assets or value to repay other creditors then that would have to be handled by a liquidator during a subsequent liquidation proceeding.

Is it Possible to Stop Administrative Receivership?

First and foremost, it is important to understand that the creditor who is about to exercise administrative receivership is only interested in collecting what is owed to them. However, even if you can't come up with the total amount due it may be possible to satisfy the lender by proposing a viable payment plan in the form of a company voluntary arrangement (CVA) for Northern Ireland based companies.

It may also be possible to enter into administration voluntarily in order to place a protective moratorium around your company while an appointed administrator works to negotiate with creditors and reduce debts - read more on administration in Northern Ireland. If a receiver has not yet been appointed to take control of your company's assets then you may be able to use some of those assets as collateral to obtain secured financing that could then be used to repay the disgruntled debenture holder before they take aggressive legal action.

If you have any questions about administrative receivership or any other matter related to corporate or personal insolvency in Northern Ireland or the rest of the UK, feel free to ask one of our experts online or call us on 0800 644 6080 to participate in a free consultation.


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