What is an Official Receiver?
As mentioned above, an Official Receiver is required for cases of compulsory liquidation. A creditor will issue a winding up petition to the court, as they believe the business cannot pay their debts as they fall due and this is their last option. The Official Receiver will be notified by the court of the winding up order and will be appointed as liquidator, or trustee in bankruptcy for personal matters. An Official Receiver may act as the provisional liquidator in cases of compulsory liquidation with serious concern ahead of the petition being resolved. Once an Official Receiver is assigned to a case, they will administer the initial stages of the insolvency procedure and, in most cases, will be involved throughout. Their role can vary as each company’s circumstances are different.
The Official Receiver is an officer of the court and, therefore, must report their findings throughout the winding up order. They are also answerable to the Secretary of State for Business, Innovation and Skills.
What is the role of an Official Receiver?
An Official Receiver will be notified of the winding up order by the court. They will then begin the first stages of company liquidation, and be responsible for:
- Controlling the company’s affairs
- Working for the benefit of the creditors and protecting the company assets
- Recoup as much as possible for those creditors
- Investigate director conduct
- Look at the company finances, as to why the business has failed
The Official Receiver will look into director conduct, interviewing the directors of the business to gain a full understanding as to why the company has failed. To do this, they will need to examine the financial records of the business and speak to third parties; banks and accountants, for example. If they have found evidence of director misconduct, this will then be reported back to the court and the creditors, along with information on the company assets and liabilities. In cases of fraudulent or wrongful trading, the Insolvency Service could make an application to have the directors disqualified.
Official Receiver as a provisional liquidator
Once the winding up petition is submitted to the court, the compulsory liquidation procedure begins. The Official Receiver may be appointed as a provisional liquidator by that very creditor who filed the petition. This is only done in exceptional cases including:
- There are concerns regarding potential disposal of assets by the directors
- There are perishable assets to be protected
- There is a risk of serious fraud or misconduct resulting in an appointment being in the public interest
As a provisional liquidator, the Official Receiver must start the process of company liquidation. They will take control of the affairs of the company, thus protecting the company assets until the winding up hearing. A winding up order, generally, takes effect within 45 days and, in most cases, results in the winding up of a company. You can find help with regards to the process with our comprehensive compulsory liquidation guide. They will also report their findings to the court, and the company assets to the creditor should the order be granted, and the business has not managed to adjourn the winding up petition.
Official Receiver as a liquidator
The Official Receiver could be appointed as liquidator, requiring them to oversee the entire process. This is, most often, due to no other liquidator appointment. However, in their role as provisional liquidator, the Official Receiver could ask for another liquidator on the case, particularly if the company assets are large or complex.
As the liquidator, the Official Receiver is expected to arrange the valuation and sale of the company assets, to ensure the creditors receive as much as possible. They will then distribute the proceeds in the order of creditor payment, with secured creditors paid first. To distribute these company assets, they may need to speak to the creditors beforehand.
Investigating director misconduct
One of the main roles of an Official Receiver when looking into the liquidation of a company is director conduct. They must investigate the company directors, with those directors expected to complete a questionnaire. The Official Receiver is attempting to seek the reason why the business has failed and will look for evidence of fraudulent or wrongful trading.
Where does an Insolvency Practitioner come in?
An Official Receiver can ask the Secretary of State to appoint a licensed insolvency practitioner to assist with the process. However, if your business is struggling with paying creditor debts, you must act fast. Once a winding up order has been made the window to appeal this is very short.
You can speak to one of our Business Rescue Experts regarding your company finances and the possible signs of insolvency.