What Is The Difference Between Official Receiver And Liquidator?
In the UK, insolvent companies can liquidate both voluntarily and involuntarily. Not only does the way that these processes are initiated differ quite significantly (one being the choice of directors, the other being forced by creditors), but so do the key individuals involved and either an Official Receiver or a Liquidator may be appointed.
What Is An Official Receiver?
An Official Receiver is an officer of the court and civil servant, appointed to oversee the compulsory liquidation of an insolvent company when a winding-up petition is issued. They have more power than a liquidator would and can carry out the entire administration of the liquidation.
What Does An Official Receiver Do?
The appointed Official Receiver will take over the affairs of an insolvent company in order to protect assets. Once directors are no longer in control, they must comply with the requests of the Official Receiver. The Official Receiver will then scrutinise the business’ financial affairs, examining company accounts and director conduct to determine why the company has become insolvent. Once this research has been conducted, an official report is created and given to the Secretary of State for Business, Innovation and Skills and this may recommend that director conduct be investigated further.
The Official Receiver is also qualified to carry out the final liquidation of the company and realise the company assets, though they may appoint a licensed insolvency practitioner to do this in cases where it may be necessary or more suitable. If the Official Receiver does carry out this process themselves, they can sell the business assets at auction and then redistribute the funds raised to creditors in a suitable order.
What Is A Liquidator?
Liquidators are licensed insolvency practitioners who ensure that all company debts are paid, assets are sold and distributed to creditors, and that the company is correctly brought to the end of its life in a legal manner.
While a Liquidator’s role sounds very similar to an Official Receiver, this individual is selected by the directors of an insolvent company when embarking on the process of Creditors Voluntary Liquidation, rather than being appointed by the courts.
Key Differences Between An Official Receiver And A Liquidator
As we have covered, the key difference between an official receiver and a liquidator is the way in which they are appointed. However, the Official Receiver’s duty to the courts also affects the type of work they carry out. These individuals are brought into the liquidation process at the very start to take charge of the insolvent company and report any wrongdoing to the court. In contrast, a Liquidator is brought into a liquidation process to wind up the company in an efficient and effective manner. In many cases, a Liquidator will also examine company affairs but their investigative powers are typically much less than an Official Receiver.
What To Do If Your Company Is Insolvent
If your company is insolvent or you believe you are experiencing some warning signs of insolvency, you may be wondering whether it is better to appoint a Liquidator and enter into Creditors Voluntary Liquidation, or whether to wait until compulsory liquidation is actioned.
Company directors should always avoid being placed into compulsory liquidation. The powers of an Official Receiver are much more significant than those of a Liquidator and compulsory liquidation typically results in much worse outcomes for creditors. Though the work of an Official Receiver and a Liquidator will both result in the company being closed down, opting for voluntary liquidation allows you to choose your Liquidator and act in the best interests of your creditors.
Should you require any advice when it comes to the current status of your company or wish to appoint a licensed insolvency practitioner to oversee your Creditors Voluntary Liquidation process, don’t hesitate to get in touch with the team here at My Liquidation. We can talk you through the process and explain the role of each individual involved further so that you can decide on the best course of action for your business.