Company Law — Lecture 23■ External

administration— overview— receivership— statutory

schemes of arrangement

— statutory management

Overview of external administration

Three types of external administration

—receivership

—voluntary administration (Lecture 25)

—liquidation (Lecture 24)

Insolvency is commonly — but not always — the reason for a company going into external administration

Different forms of administration serve different purposes

— receivership — a way for a secured creditor to get its money back

—VA – moratorium on creditors claims while a decision about future of the company is made

— liquidation — the liquidator sells off the company’s assets and distributes the proceeds to the creditors

Receivership

What is a “receiver”?

—a person appointed to take control of some or all of a company’s assets

Who is allowed to be appointed?

—anyone not disqualified under s 5 of the Receiverships Act 1993

— the Insolvency Practitioners Bill

Who may appoint a receiver?

—the court

—a secured creditor

Function of a receiver

Broadly, where appointed under a charge (ie by a secured creditor), the receiver’s function is to collect the property secured by the charge, sell it and distribute the proceeds to the chargee (ie the secured creditor)

The receiver is an agent of the company

Powers of a receiver

Sources of the receiver’s powers

—statutory provisions of the Receiverships Act 1993

—instrument of charge

Powers under the Receiverships Act 1993

—full powers of management (s 14)

—no statutory power of sale (must be in instrument of charge)

—court-approved sale of mortgaged property (s 17)

—require supply of essential services (s 40)

—require co-operation of directors (s 12)

Duties of a receiver

Statutory duties (under Receiverships Act 1993)

—duties to the secured creditor who appointed (s 18(1))

—duties to the company and creditors (s 18(3))

Duties in relation to the sale of assets

—s 19

Liabilities of a receiver

An indemnity is routinely obtained from the secured creditor who appointed the receiver

Types of liability

—for breach of common law or statutory duties

—from invalid appointment

—from contracts entered before receivership

—from contracts entered during receivership

Statutory schemes of arrangement

Amalgamation (s 129, Companies Act 1993)

Compromise with creditors (Part XIV, Companies Act 1993)

Restructure of share capital (s 235, Companies Act 1993)

Statutory management

Government-initiated control of a company

Provided for in the Corporations (Investigation and Management) Act 1989

Rarely used — usually in instances of serious corporate collapse

Suspends creditors’ rights

Protects wider stakeholder interests — creditors, shareholders, public