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UK Receivership Law

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Believe it or not, UK receivership law is in place to protect all parties involved! Whilst a business in the midst of receivership proceedings might not look on it favourably, it could actually benefit the company in more than one way. In order to understand what happens when a company goes into receivership it is first necessary to understand exactly what receivership is. The most common type of receivership is administrative receivership.

UK receivership law allows for a creditor to secure its loan with assets (tangible or other) in the event that the business is remiss in making payments. The creditor can file receivership and will then be allowed to appoint a receiver to recuperate any monies due. In the process, the administrative receiver will take on the day to day running of the business. The directors will be ousted. If the company is eventually returned to the owners/shareholders, they have the option to reinstate the director or elect/hire a director who isn't as likely to mismanage the company.

What happens when a company goes into receivership ordered by the government is another matter altogether. Now the receiver will be an official receiver, an officer of the court, who is responsible for completing a close scrutiny of the business operations which led up to receivership. UK receivership law is very strict and if the official receiver finds any wrongdoing on the part of anyone connected with running the company, criminal charges can be imposed as well.

Since there is so much involved when a company is placed in receivership, the best advice would be to avoid it altogether. However, in the event that there is no way around it, the advice of a licensed Insolvency Practitioner or Solicitor should be sought at the earliest opportunity. There are times when creditors are acting unfairly as well as times when the government does not have a valid case against the business. For your own protection, get expert counsel.

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