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Government Ordered Receivership

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It is commonly understood that the court orders receivership in the UK, but most companies don't understand the implications of what going into receivership truly means. First of all, there are a few ways in which a company may fall under receivership other than a governmental order to cease operations. Creditors may petition for compulsory liquidation upon which the court will appoint an official receiver who will act on behalf of the creditors until such time that they can choose their own administrative receiver or liquidator.

However, government ordered receivership is another matter altogether. If the company has been found to be operating in a manner contrary to the public good, it can be immediately put into receivership. Receivership UK laws are quite harsh in this regards and most often result in compulsory liquidation of assets. The proceeds from realisation of assets will go toward compensating consumers or shareholders for their losses, punitive damages, legal fees and any other damages or fines levied by the court.

During the process, the Secretary of State for Trade and Industry will file a petition for the winding up of a company based on public interest. The next step is to refer that company to the court who will appoint an official receiver. The OR is a civil servant and will act on behalf of the government throughout the winding up proceedings. The OR is not only a civil servant but is also an officer of the court who will then become the liquidator as assets are realised. It is his/her responsibility to investigate the conduct of all officers of the company, directors and perhaps even shareholders to see where the responsibility rests. Any findings will be reported to the court and a judgment is based on those findings. While liquidation is one possible outcome, bear in mind that criminal charges may be sought as well.

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