The role of the Official Receiver in business insolvency

What does the appointment of an Official Receiver mean?

When the news of a large company having failed hits the headlines, we sometimes hear that certain actions have been taken by ‘The Official Receiver’, but what is an official receiver and what role does an ‘OR’ play?

When an insolvent company is unable to pay its debts, it can voluntarily begin insolvency proceedings and if taken early enough, this can result in a business being turned around and ultimately saved. Where no action is taken, the companies, individuals, or public bodies to whom money is owed can take matters into their own hands and petition the court to force the debtor company to close. If successful, a winding up order will be issued. This is sometimes also known as compulsory liquidation.

A company subject to a compulsory liquidation (or a person being declared bankrupt) will have the OR appointed to protect and manage the assets of the business (or individual) in the short term. Just as importantly, the OR is duty bound to investigate the reasons for the failure of the business.

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.

Are you facing the prospect of a winding up order?

If your company is struggling, is insolvent, or you suspect that it might soon be subject to a winding up order, it’s imperative that action is taken. We’ve written previously about ‘The Ostrich Syndrome‘ and business problems almost never go away when ignored. Quite the opposite in fact.

While it’s preferable to engage the services of an Insolvency Practitioner early, something which may well save a business, if you’re at the stage of being threatened with compulsory liquidation, we can still make a difference and deliver a substantially better outcome than if your situation is left to deteriorate further.

Even at this late stage, we can help. Contact us for a free consultation. You have nothing to lose but your worry.