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is for a short period of time. This is due to the perception of a receiver‘s appointment
not as a company doctor but as an undertaker.
A receivership has a far reaching effect for often once a receiver is appointed, other
creditors, secured and unsecured, start to panic and will rush to get payments from
the company. The unsecured creditor would then file a winding up petition, while
other secured creditors will start appoint a receiver. The effect of this would be to
divide the property and reduce the value of the company. Consequently, the
unsecured creditors will be left with the crumbs after all the preferential and secured
creditors have been paid.
11.2.2 Voluntary Administration
Administration is an alternative procedure available to the company which is
insolvent or at the brink of insolvency. A winding up signifies the end of the
company, and creditors are entitled to what is left in the company according to the
pari passu rule. 12 Administration offers an opportunity to preserve a company as a
going concern.
In the UK, the administration process was modified in 2002 by the Enterprise Act.
The significant changes made by the Act included the abolition of the administrative
receiver as regards floating charges made on or after 15 September 2003, simplifying
the procedures to enter administration by dispensing with the need to obtain a court
order, and replacing multi-purpose administration by a single purpose administration
to be selected according to a three-part hierarchy. 13
Schedule B1 which was inserted in the Insolvency Act 1986 by virtue of the
Enterprise Act 2002 sets out three tiers of hierarchic objectives. 14 An administration
12 Roy Goode Principles of Corporate Insolvency Law (Sweet & Maxwell, London , 2005) at [7-02]-
[7-04].
13 Ibid at [10.08].
14 Ibid.
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