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What Is the Difference between Receivership, Administration and Liquidation?

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In order to understand the difference between receivership, administration and liquidation, it probably would be a good idea to think of all three in terms of insolvency. If a business goes insolvent and is unable to pay its debts, a creditor that has a secured line of credit can file receivership on the business to recuperate the money it loaned. This is called administrative receivership. So at times, receivership and administration are the exact same thing. The creditor takes over the administration of the business to realise assets to pay off the loan. But there is a difference between administration and receivership in terms of government imposed receivership. If the government imposes receivership because of unpaid taxes or charges of wrongful operations, that is not considered administration. The business is turned over to an officer of the court, an Official Receiver.

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Now then, is there a difference between liquidation and receivership, or a difference between administration and receivership? Not always. Most often receivership will result in liquidation of assets or even of the entire business in order to pay off debts. But here again, not all assets will be liquidated all the time. The three are closely united insomuch as they are all related to compulsory insolvency. If the business is unable to pay debts to a creditor or the government, it will be placed in receivership to satisfy those debts. The only term that is not consistent all of the time is administration and that is because government imposed receiverships are not titled administrative receivers, but rather official receivers as they answer directly to the court. If your company is in danger of becoming insolvent or going into receivership, administrative or otherwise, it is in your best interest to consult with an Insolvency Practitioner to find out what you can do to protect yourself and your business.

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