appointable and removable only by, and solely the agent of, the mortgagee.[122] In companies, secured lenders who had taken a floating charge

Receivership sources
Main articles: Receivership, English property law, and Mortgages in English law

For businesses where floating charges were created before 2003, and in eight types of corporate insolvencies in the Insolvency Act 1986, sections 72B to 72GA, an older procedure of administrative receivership remains available. These companies are capital market investments; public-private partnerships with step in rights; utility projects; urban regeneration projects; large project finance with step in rights;[121] financial market, system and collateral security charges; registered social landlords; and rail and water companies. Until the Enterprise Act 2002, creditors who had contracted for a security interest over a whole company could appoint their own representative to seize and take a company's assets, owing minimal duties to other creditors. Initially this was a right based purely in the common law of property. The Law of Property Act 1925 gave the holder of any mortgage an incidental power to sell the secured property once the power became exercisable. The receiver was appointable and removable only by, and solely the agent of, the mortgagee.[122] In companies, secured lenders who had taken a floating charge over all the assets of a company also contracted for the right upon insolvency to manage the business: the appointed person was called a "receiver and manager" or an "administrative receiver".[123] The Insolvency Act 1986 amended the law so as to codify and raise the administrative receiver's duties. All receivers had a duty to keep and show accounts,[124] and administrative receivers had to keep unsecured creditors informed, and file a report at Companies House.[125] By default, he would be personally liable for contracts that he adopted while he ran the business.[126] For employment contracts he could not contract liability if he kept employees working for over 14 days.[127] However, the administrative receiver could always be reimbursed for these costs out of the company's assets,[128] and he would have virtually absolute management powers to control the company in the sole interest of the floating charge holder.

decisions which may turn out sub-optimal with the benefit of hindsight. Here the price was the best possible in the circumstances

This wide discretion of the administrator to manage the company is reflected also in paragraph 3(3)-(4), whereby the administrator may choose between which result (whether saving the company, selling the business, or winding down) "he thinks" subjectively is most appropriate. This places an administrator in an analogous position to a company director.[116] Similarly, further binding duties allow a broad scope for the administrator to exercise good business judgment. An administrator is subject to a duty to perform her functions as 'quickly and efficiently as is reasonably practicable',[117] and must also not act so as to 'unfairly harm' a creditor's interests. In Re Charnley Davies Ltd (No 2) the administrator sold the insolvent company's business at an allegedly undervalued price, which creditors alleged breached his duty to not unfairly harm them.[118] Millett J held the standard of care was not breached, and was the same standard of care as in professional negligence cases of an "ordinary, skilled practitioner". He emphasised that courts should not judge decisions which may turn out sub-optimal with the benefit of hindsight. Here the price was the best possible in the circumstances. Further, in Oldham v Kyrris it was held that creditors may not sue administrators directly in their own capacity, because the duty is owed to the company.[119] So a former employee of a Burger King franchise with an equitable charge for £270,000 for unpaid wages could not sue the administrator directly, outside the terms of the statutory standard, unless responsibility had been directly assumed to him.[120]
Receivership
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before entering administration will count for the purpose of administrator's expenses, it is less likely to do so if the business is sold

Once in place, the first task of an administrator is to make proposals to achieve the administration objectives. These should be given to the registrar and unsecured creditors within 10 weeks, followed by a creditor vote to approve the plans by simple majority.[106] If creditors do not approve the court may make an order as it sees fit.[107] However, before then under Schedule B1, paragraph 59 the administrator can do 'anything necessary or expedient for the management of the affairs, business and property of the company'.[108] In Re Transbus International Ltd Lawrence Collins J made the point that the rules on administration were intended to be "a more flexible, cheaper and comparatively informal alternative to liquidation" and so with regard to doing what is expedient "the fewer applications which need to be made to the court the better."[109] This means that an administrator can sell the whole assets of a company immediately, making the eventual creditors' meeting redundant.[110] Because of this and out of court appointments, since 2002, "pre-packaged administrations" became increasingly popular. Typically the company directors negotiate with their bank, and a prospective administrator, to sell the business to a buyer immediately after entering administration. Often to the company's directors are the buyers.[111] The perceived benefits of this practice, originating in the 1980s in the United States,[112] is that a quick sale without hiring lawyers and expending time or business assets through formalities, can be effected to keep the business running and employees in their jobs. The potential downside is that because a deal is already agreed among the controlling interested parties (directors, insolvency practitioners and the major secured creditor) before broader consultation, unsecured creditors are given no voice, and will recover almost none of their debts.[113] In Re Kayley Vending Ltd, which concerned an in-court appointed administrator,[114] HH Judge Cooke held that a court will ensure that applicants for a prepack administration provide enough information for a court to conclude that the scheme is not being used to unduly disadvantage unsecured creditors. Moreover, while the costs of arranging the prepack before entering administration will count for the purpose of administrator's expenses, it is less likely to do so if the business is sold to the former management. Here the sale of a cigarette vending machine business was to the company's competitors, and so the deal was sufficiently "arm's length" to raise no concern. In their conduct of meetings, the Court of Appeal made clear in Revenue and Customs Commissioners v Maxwell that administrators appointed out of court will be scrutinised in the way they treat unsecured creditors. Here the administrator did not treat the Revenue as having sufficient votes against the company's management buyout proposal, but the court substituted its judgment and stated the number of votes allowed should take account of events all the way in the run up to the meeting, including in this case the Revenue's amended claim for unlawful tax deductions to the managers' trust funds and loans to directors.[115]