Insolvency-related receiverships are divided into two other categories: administrative administration/capital administration, where the insolvency practitioner is given extensive administrative powers over all or most of a company`s assets, and other receiverships (sometimes erroneously referred to as fixed-fee receiverships), where the insolvency practitioner has limited control over certain assets; and has no broader powers beyond the management or sale of the individual asset. Because of its unique role, insolvency law generally confers broad powers on insolvency practitioners under applicable insolvency law (which generally goes hand in hand with the powers conferred in the security document). [20] Parliament expects businesses and creditors to prefer administration to receivership. Crucially, however, Parliament had recognized in the Insolvency Act that administrative receivership should take precedence, i.e. a secured creditor with varying burdens could nullify any attempt to establish an administration by appointing an administrative receiver. As a result, the administration was not as popular as legislators had imagined, and secured creditors usually appointed administrative insolvency administrators to enforce security rights. Parliament took more drastic measures with the Companies Act 2002. They changed the management system to make it more attractive, but also prohibited the right to appoint directors for all securities created after 15 September 2003 (subject to certain specific exceptions). Any attempt to do so will take effect as the power to appoint a director. A receiver has the flexibility to develop strategies to pay off business debts that are not typically available in bankruptcy.
More money can be secured for creditors and shareholders, which could save the company from closure. However, depending on the proceeds of the sale of the assets and the amounts of secured and unsecured debt, not all creditors and shareholders will be paid during the liquidation. Several regulatory agencies have been empowered by Congress to place banking and financial institutions in receivership, such as the Office of the Comptroller of the Currency for failing national chartered commercial banks; the Office for the Control of Savings of Failing Savings and Loan Associations (Sparkassen); and the Federal Housing Finance Agency (FHFA) for government-sponsored businesses (GSEs) such as Fannie Mae, Freddie Mac, and the 11 federal mortgage banks. Most states have also imposed receivership on their own banking and insurance regulators. State insurance divisions are accredited by the National Association of Insurance Commissioners (NAIC), which states that “state law should establish a receivership system for the insurance commissioner`s management of insurance companies found insolvent, as outlined in the NAIC`s Model Insurer Receivership Act.” [5] It follows, however, that the current law generally requires administrative insolvency practitioners to submit reports relating to the period of their receivership. [21] Generally, an insolvency practitioner is an accountant with considerable experience in insolvency matters. The possibility of appointing a receiver and an administrator was a very effective means, but it was considered unsatisfactory as it was exclusively a matter of the contract between the creditor and the borrower. The borrower or any other party generally did not have the opportunity to review the actions taken by the insolvency practitioner (who would generally act on behalf of the borrower under the security document) or to seek court supervision. A general review of UK insolvency law in the 1980s began with the Cork Report and culminated in the Insolvency Act 1986.
He proposed two important reforms. First, it placed the insolvency practitioner and the managing director on a legal basis: a trustee appointed for all or almost all of the assets of a company was now a receiver and was subject to certain legal responsibilities. Second, an “administrative order” has been introduced as a procedure equivalent to administrative sequestration, but it is open to any company by court order, regardless of any particular security regime. In common law jurisdictions outside the United Kingdom, administrative receivership remains alive and sound.