Titan Europe 2007-1 (NHP) Limited - Irish Stock Exchange

the same priority in respect of any property of the company directly or indirectly representing the property being
disposed of as he would have had in respect of the property subject to the floating charge. Where the security in
question is other than a floating charge, it shall be a condition of the secured creditor’s consent or leave of the
court that the net proceeds of the disposal shall be applied towards discharging the sums secured by the security.
The administrator is nevertheless bound by the priority of the security granted under the security deed.
The costs and expenses of the administration are payable out of the company’s realised assets in priority to
payments to floating chargeholders, unlike in a liquidation where preferential creditors and floating
chargeholders are paid in priority to the costs and expenses of the liquidation.
The Enterprise Act has also introduced the concept of the ‘prescribed part’ (an obligation on the
administrator of a company that has created a floating charge over its assets, to hold aside a portion of the
proceeds of realisation of such floating security for the satisfaction of unsecured debts in priority to the claims
of the floating charge holder) which is outlined in more detail in the section headed “— Liquidation” below.
Receivership. A distinction is drawn between the various types of receiver that exist under English law. A
receiver appointed to enforce a fixed charge over real property granted by a company or an individual is usually
appointed under the provisions of the Law of Property Act 1925 (“LPA”) and derives his powers from both the
LPA and the charge instrument. An LPA receiver’s powers are limited under statute to the powers to demand,
recover and receive the income of property over which they have been appointed receiver, but such powers are
usually extended by the charge instrument and typically include the express power to take possession of the
charged assets. Alternatively receivers may be appointed in respect of other fixed charge assets, their rights and
powers deriving from the charge instrument.
Conversely, where a receiver is appointed over the whole or substantially the whole of a company’s
property by a secured lender under a charge which, as created, was a floating charge, or under such a charge and
one or more other securities, the receiver is known as an “administrative receiver”, and has extensive powers
under the Insolvency Act 1986, including the power to take possession of all charged assets and run the business
of the company. It should be noted that as a result of the Enterprise Act, save in respect of certain specialised
corporate financing situations (including a number of typical asset-backed securitisation structures), holders of
floating charges created after 15 September 2003 are no longer able to appoint administrative receivers, and
instead must enforce their security rights through an administration of the chargor.
Administrative receivers often require an indemnity to meet their costs and expenses (notwithstanding the
statutory indemnity to which they are entitled under the Insolvency Act 1986) as a condition of their
appointment or continued appointment, although in the case of lending secured on real property, the receiver
may be content with the statutory position. Such an indemnity would rank ahead of payments on the lending.
A receiver is deemed by law to be the agent of the mortgagor or chargor until the commencement of
liquidation proceedings against such entity, at which point he becomes the agent of the appointing secured
creditor. If a liquidator is appointed in respect of a chargor when a receiver is still in office, the receiver may
still continue to realise the assets the subject of the security and the liquidator will usually “stand aside” and
allow the receiver to finish his enforcement process in respect of the charged assets.
Where the lender believes that a chargor is diligently taking all appropriate steps to make good any breach
under a loan or charge instrument, and the security granted in respect of lending is not prejudiced, or where the
lender does not believe it would be in the interests of the noteholders to do so, the lender may decline or defer
appointment of any receiver.
In cases where a property is lawfully occupied by third parties pursuant to leasehold interests granted by the
related owner of the property, the receiver’s right to possession would be exercised by directing the tenants to
pay rent to the lender. However, in the event that receiver takes possession of a property, it may be liable in
respect of claims that are typically made against the owner of the property.
Receivers will generally choose to sell the property the subject of the security interest. This is normally
conducted as a private transaction through sales agents appointed by the receiver. Alternatively the receiver
may choose to manage and operate the asset itself for a period of time. Receivers may have powers to borrow
funds to operate the property (which are treated as an expense of the receivership and so rank ahead of the
secured debt) or re-let or redevelop the property.
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