ADMINISTRATIVE RECEIVERSHIP Meaning and
Definition
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Administrative receivership is a legal term referring to a specific type of insolvency procedure. It occurs when a company is unable to repay its debts, thereby breaching the terms of a fixed charge granted to a secured creditor, typically a bank or financial institution. Under administrative receivership, the secured creditor has the authority (granted by the floating charge granted by the company) to appoint an individual known as an administrative receiver to take control of the company's assets. The main objective of administrative receivership is to recover the dues owed to the secured creditor.
During administrative receivership, the appointed receiver can make business decisions, sell assets, and take necessary actions to repay the secured creditor's debt. Unlike other insolvency procedures, such as administration or liquidation, the primary focus of administrative receivership is to satisfy the claims of the secured creditor who appointed the receiver. However, the receiver also has a responsibility to act in the best interests of all creditors and stakeholders as far as possible.
Administrative receivership provides the secured creditor with a powerful tool to recover its debts, providing they hold a fixed charge over most or all of the company's assets. This mechanism allows the secured creditor to influence the financial decisions and potentially control the fate of the company. Since the receiver acts on behalf of the secured creditor, they are subject to legal obligations regarding transparency, accountability, and appropriate distribution of any funds realized from the company's assets.
Etymology of ADMINISTRATIVE RECEIVERSHIP
The word "administrative" is derived from the Latin word "administrativus", which is formed from the stem "administrare" meaning "to manage" or "to administer". "Administrare" is a combination of the prefix "ad-" meaning "to" or "towards", and "ministrare" meaning "to serve" or "to attend to". Thus, "administrative" refers to something related to the management or administrative duties of an organization.
The term "receivership" comes from the word "receiver", which is derived from the Old French word "receivre", meaning "to receive" or "to accept". In the legal context, a receiver is a person or entity appointed by a court or other authority to take control and manage the affairs of a company or property for the benefit of creditors, shareholders, or other stakeholders.
