You are here: Home > Services for Business > Debt Recovery > Frequently Asked Insolvency Questions

Frequently Asked Insolvency Questions

We are often asked about the difference between a Receiver, a Liquidator and an Administrator. There is a common adoption of these words in relation to an insolvent company but people rarely understand the semantics behind these terms. Firstly lets cover the basic terms:

Insolvent - This is a term which relates to either an individual, partnership or company to describe their financial state when they are unable to discharge their liabilities.

Fixed Charge - This is the granting of security of a specified item or items which are named in the debenture (charge document). It is fixed on those particular items named.

Floating Charge - This is the granting of security over the unnamed assets and "floats" over the top of them. It can be over both current and future assets. The company can deal with those assets until crystallisation occurs at which point these before locked onto the goods or "crystallised", as it is known.

Note: The terms receiver, liquidator and administrator all relate to corporate insolvency (involving companies) and do not cover individuals.

What is a Receiver? 

A receiver is a person or persons who are appointed in order to deal with the property of a company on behalf of (and for the benefit of) a fixed or floating charge-holder. They do not act for the benefit of the creditors as a whole.

There are 3 types of receiver:-

  1. LPA Receiver (Law of Property Act Receiver) : This is a receiver who is appointed under the limited circumstances set out in the LPA 1925. Unlike most other insolvency post-holders this type of office holder does not have to be an Insolvency Practitioner(IP).
  2. Fixed Charge Receiver : This is a receiver who is appointed under a debenture (fixed charge), to recover sums due under that debenture for the benefit of the debenture holder. Again this is one of the few posts where you do not have to be a qualified Insolvency Practitioner (IP) to hold this position. The appointment can be made by the court under section 37 Supreme Court Act 1981.
  3. Administrative Receiver (AR's) : This is a position which must be held by a qualified IP who holds a current valid licence to practice. They act as an agent of the company on behalf to the whole of the company's property. AR's are only applicable to floating charge holders with floating charges created before 15 September 2003. These are known as QFC (Qualified Floating Charge-holders).

What is a Liquidator? 

A liquidator is a qualified insolvency practitioner whose is appointed to liquidate (i.e. turn the assets into cash) the company's assets to pay the creditors of the company. They are not interested in rescuing the company just maximising the return for the creditors as a whole.

There are 3 different types of liquidation which depends upon who starts the process:

  1. Members Voluntary Liquidation : This is the liquidation of the company by its own members. It is a solvent liquidation (i.e. the company does not owe anyone any money but it wants to close down.) The Directors swear a declaration of solvency and all of the creditors are paid.
  2. Creditors Voluntary Liquidation : This is the liquidation of the company by its members. It is an insolvent liquidation (i.e. the company is insolvent and is unable to pay its liabilities as and when they fall due). This is where the company "calls in the liquidators".
  3. Compulsory Liquidation :This is the liquidation of the company by the court. It can be presented by a creditor, the directors, the company itself and a few other categories of people. It is an insolvent liquidation (i.e. the company is insolvent and is unable to pay its liabilities as and when they fall due). These types of cases are very often brought by a creditor in an attempt to secure payment for a debt which they are owed.

What is an Administrator?

This is the name given to a licensed Insolvency Practitioner who is tasked with overseeing the administration of the company which is the process by which it is aimed to rescue the company as a going concern. This is in strict contrast to a liquidator who sole purpose to to turn all assets into cash. Schedule B of the Insolvency Act 1986 deals solely with administration, the office holder's remit and the governing principles.

For further information about insolvency and debt recovery, contact Martin Kingman.

Quick contact

Furley Page Solicitors in Kent, London, Canterbury, Chatham & Whitstable
Get in touch on 0845 603 10 57