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Corporate Insolvency LawTheory and Application$
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Rizwaan Jameel Mokal

Print publication date: 2005

Print ISBN-13: 9780199264872

Published to Oxford Scholarship Online: January 2010

DOI: 10.1093/acprof:oso/9780199264872.001.0001

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Administrative Receivership and the Floating Charge

Administrative Receivership and the Floating Charge

(p.188) 6 Administrative Receivership and the Floating Charge
Corporate Insolvency Law


Oxford University Press

This chapter considers the twin institutions of the floating charge and administrative receivership. It explains the distinctive role played by the floating charge by examining the empirical context in which it operates and by comparing the recoveries made by different classes of creditor in corporate liquidation. The analysis suggests that whereas the fixed charge in included in debentures so as to provide its holder with priority, the floating charge is a residual management displacement device. Its dominant role is to ensure the integrity of the debtor's estate when the latter becomes distressed and its management is displaced in favour of a specialist distress-oriented manager. This is where administrative receivership (‘receivership’) comes in. Traditionally, the replacement of the distressed company's management has been brought about by the appointment of a receiver (formerly, a receiver and manager). However, the chapter harnesses theory and evidence in favour of the argument that receivership is significantly destructive of social value, and that it is unfair and oppressive. Its virtual abolition by the Enterprise Act 2002 is therefore welcomed. However, the substitution of receivership with administration also, it is argued, signals the end of the usefulness of the floating charge. The chapter concludes by sketching out a case for the abolition of this type of charge.

Keywords:   priority, administrative receivership, floating charge, creditors' recoveries, coordination costs, motivation costs, registration, concentrated creditor, corporate rescue, business rescue

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