An Official Receiver is employed by the Insolvency Service and is a civil servant of the court to act in cases of compulsory liquidation and bankruptcy.
The Official Receiver is appointed liquidator on the making of the winding up order, and administers the first stages of the winding up procedure. In this article, we are outlining what is an official receiver, and their role in the process
The Official Receiver (OR) plays a key role in compulsory liquidations, where a creditor obtains a winding up order from the court. The OR is notified and takes initial control of the liquidation process.
It’s not always the case that they complete the entire procedure, however. In some instances an independent liquidator is appointed to administer the liquidation process and distribute funds to creditors.
The Official Receiver is a court officer, but also works in support of the Insolvency Service, so what might the OR do during a liquidation process – what is their role?
What is an Official Receiver?
As mentioned above, an Official Receiver or OR as it is sometimes referred to 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 the Official Receiver
When a company is placed into compulsory liquidation by the court, the Official Receiver (an officer of the Insolvency Service formally attached to a particular court) becomes the provisional liquidator.
In some situations, the Official Receiver will then make a recommendation for the appointment of an Insolvency Practitioner who would then take over part his role. This situation commonly arise when speed is of the essence: for example if some of the company’s assets were perishable goods, or when the case is complex.
Even when the OR does recommend the appointment of another IP, he/she will still conduct the directorial investigation, which is a standard part of the liquidation process.
What is the Difference Between a Liquidator and a Receiver?
The main differences between a liquidator and an official receiver are not the roles themselves, but the insolvency procedures that they administer and manage. A liquidator is appointed by the directors in a MVA or a CVL, which allows the directors to retain an element of control over the process.
An official receiver is appointed as liquidator by the Court when a winding-up order has been granted as a result of a creditor(s) forcing a company into compulsory liquidation.
That said, the official receiver may seek the appointment of liquidator if he or she believes that the complexity of the case requires and IP appointment.
The Official Receiver as provisional liquidator
A provisional liquidator is required in some insolvency cases, from the time a winding-up petition is presented to the courts. This can occur if the petitioning creditor believes that company assets might be sold, or that another creditor may be treated preferentially by the debtor company.
As provisional liquidator, the Official Receiver is responsible for safeguarding company assets and records until the winding-up hearing. If a winding-up order is subsequently granted by the court, the OR will report to creditors and shareholders on the company’s assets and liabilities. They may also make a report to court if necessary.
If there are sufficient assets of value available, the Official Receiver may request the Secretary of State to appoint another liquidator, or ask that creditors do so via a creditors’ meeting.
What powers does the Official receiver have?
The Official Receiver is a civil servant in The Insolvency Service and an officer of the court. They will be notified by the court of the bankruptcy or winding-up order of a company. They will then be responsible through staff for administering the initial stage. This stage includes collecting and protecting any assets and investigating the causes of the bankruptcy or winding up.
An official receiver acts as a provisional liquidator after an order of a winding up has been made. Afterwards, they can ask the Secretary of State to appoint an Insolvency Practitioner or call a creditors meeting and ask for one to be appointed. The official receiver also has a statutory duty to look into the behaviour of the directors of an insolvent company.
This may lead to the Insolvency Service making an application to the DeBIS to have the directors disqualified in the cases where clear fraud or wrongful trading can be established.
In essence an official receiver is appointed when a company is put into compulsory liquidation or an individual is declared bankrupt.
Official Receiver appointments aren’t usually good news
The Official Receiver is a civil servant working for the Insolvency Service, and is an officer of the court. He will take on the role of liquidator once a winding up order has been made against a company. From there, the OR will take charge of assets. He may ask either the Secretary of State or an assembled meeting of creditors to appoint an Insolvency Practitioner if he feels that they have the skills and resources to obtain better realisations for creditors.
Alternatively, the Official Receiver may continue to act as liquidator or trustee and complete the sale of assets, distributing the proceeds of those sales, in accordance with the provisions of the Insolvency Act, to the creditors.
Whether the role of liquidator is passed on to an Insolvency Practitioner or executed by the Official Receiver, the OR will continue to be responsible for investigating the affairs of the insolvent company or individual.
The conduct of Directors and the part they played in the insolvency will be thoroughly investigated and if misconduct is uncovered, there are potential consequences for the offending individuals. Being disqualified from serving as company directors and being made personally liable for the debts of the company are amongst the penalties which can be brought to bear.
Official Receiver’s Investigation Into Directors’ Conduct
As part of the compulsory liquidation process, the Official Receiver has to investigate the actions of the company’s directors prior to the winding-up order.
Each director must attend a two hour interview with the Official Receiver where they will be asked to provide a statement of affairs of the company and discuss the events leading up to the company’s insolvency.
As a director, it is very important that you prepare thoroughly for this interview. You will need to have all relevant information, including accounts and statements ready to submit to the Official Receiver.
The Official Receiver can also require a director to attend court for examination. This is very unusual and only used in situations where it’s suspected there has been severe misconduct on the part of the director.
A report is sent to the Secretary of State for Business, Innovation, and Skills, and a decision made as to whether the directors should be investigated further. The initial report by the OR typically paints a clear picture of how directors have conducted their business, however, and can lead to serious consequences in some cases.
The Official Receiver works in the interests of company creditors, as well as in the interests of the public at large. The investigations they conduct can safeguard individuals and other businesses from unscrupulous directors who sometimes run a number of companies that enter insolvency and cause financial harm to many.
Need Further Help
If you would like more information about the Official Receiver and their role in liquidation we can help. We have extensive experience of compulsory liquidations, and with nationwide offices, you can take advantage of our free initial same-day consultation wherever you are located in the UK.