This article examines key differences between receivers, liquidators and administrators.
What is a liquidator?
- A liquidator can be appointed by the creditors of an insolvent company or by the Court.
- In simple terms, the role of a liquidator is to, inter alia:
- Collect, protect and realise the assets of the company;
- Investigate whether there are any potential claims available to the company, such as illegal phoenixing activity, and report the same to the creditors of the company
- Examine why the company failed and report any possible offences to ASIC; and
- Distribute money to the creditors.
What is a receiver?
- A receiver can be appointed by a creditor with a security that allows them to appoint a receiver.
- Generally, the role of a receiver is to:
- Collect and sell the secured asset to pay the debt owed to the secured creditor;
- Pay monies out in the order required by law; and
- Report to ASIC any offences or irregularities.
What is an administrator?
- A company may voluntarily agree to appoint an administrator by entering voluntary administration (“VA”).
- The purpose of a VA is to decide the fate of the company where the directors think the company is or could be insolvent. The administrator aims to come up with a plan that will give a better return to creditors than winding up the company immediately.
- Once an administrator takes control of the company they must investigate and then report to the creditors about three options:
- Ending the VA and returning the company to the director/s
- Approving a deed of company arrangement (“DOCA”)
- Winding the company up and appointing a liquidator.
What are major differences between a liquidator, a receiver and an administrator?
- Duties – Administrator’s and liquidator’s primary duties are to the creditors of the company as a whole, whereas a receiver’s principal duty is to the secured creditor that appointed them. That being said, receivers do still have a duty to the unsecured creditors of the company to take reasonable care and have the same duties as a director.
- Trading – Receivers may continue to trade a business until the applicable assets are sold, and may continue to trade after the receivership ends. Similarly, an administrator may continue to trade during a VA; and if a DOCA is agreed and/or the company is handed back to the director/s, then the company may continue to trade once the VA ends. However, once a company is placed into liquidation the company will commence being wound up and will soon cease to exist.
- Directors’ roles – A receivership will not affect the company’s board – the directors will remain directors. In a liquidation or an administration, however, the directors will no longer be able to use their powers as directors and will have an obligation to assist the liquidator or administrator.
Disclaimer
The information contained on this website is for general guidance on matters of interest only. The application and impact of laws can vary widely based on the specific facts involved.
Accordingly, the information on this site is provided with the understanding that the authors and publishers are not providing legal advice. As such, it should not be used as a substitute for consultation with professional legal advisers. Before making any decision or taking any action, you should consult with a professional lawyer from Rouse Lawyers.