Relationship between receivers and the company and unsecured creditors
Produced in partnership with John Hughes of Shakespeare Martineau LLP
Relationship between receivers and the company and unsecured creditors

The following Restructuring & Insolvency guidance note Produced in partnership with John Hughes of Shakespeare Martineau LLP provides comprehensive and up to date legal information covering:

  • Relationship between receivers and the company and unsecured creditors
  • Administrative receivership
  • Court-appointed receivership
  • Fixed charge or LPA receivership

Administrative receivership

The position of employees following the appointment of an administrative receiver

As a general rule, employees are not immediately affected by the appointment of an administrative receiver and there is no automatic termination of contracts. For more information see Practice Note: How a company's insolvency affects its employees.

However, this is subject to the following three exceptions, which would result in automatic termination: (1) if the appointment is accompanied by an immediate sale of the business; (2) where simultaneously, or soon after the appointment, the administrative receiver and employees enter into a new contract that is inconsistent with the old contract; or (3) where the continuation of the employment of a particular employee would be inconsistent with the role and functions of the administrative receiver (eg where the appointment of an administrative receiver makes the role of a managing director redundant).

Administrative receivers attract personal liability for any contract entered into by them in carrying out their functions and for any contract of employment they adopt in carrying out those functions relating to qualifying liabilities, ie wages, salary and contributions to an occupational pension scheme.

Any employee whose contract of employment is not terminated within 14 days of the administrative receiver being appointed will be able to look to the administrative receiver for payment of any wages