Company Law

[purplemyrtos]

What is the difference between recievership and administration? Can an employer close business and give no notice or redundancy to staff?

[Buenchico]

I'm sure you'll get some more learned answers than mine (or at least answers that will provide links to detailed information). However, here's a quick layman's response to your question:

When a firm goes into administration, it hasn't actually 'gone bust'. It means that the affairs of the company have been put into the hands of external administrators, whose job it is to try (if possible) to rescue the firm from the threat of corporate bankruptcy. In many cases, the administrators will quickly find that there's no real hope of saving the firm and 'receivership' will soon follow. In some cases, however, the administrators manage to 'turn the company round'. (e.g. Leeds United and Ipswich Town football clubs both went into administration but came out again).

Administrators have wide powers to carry out their tasks, including dismissing staff or temporarily ceasing trading.

'Receivership' is when a company has actually 'gone bust' and it's affairs are put into the hands of a receiver. If this occurs, the employer (i.e. the company) effectively ceases to exist and is therefore normally unable to employ anyone or to run a business. It's possible that the receiver might act quickly to try to sell the business 'as a going concern', thus re-creating some jobs, but this rarely happens.

It's a criminal offence to trade while insolvent so, irrespective of whether formal administration or receivership has actually happened, there are circumstances when an employer will have no choice other to close the business without notice to his staff.

Chris

[buildersmate]

Yes, employees become one of the many creditors of the decreased company - somewhere beneath HMRC.

[cascarelli]

If the company cannot afford to pay you redundancy (i.e. it has gone into receivership) then there is a scheme where the Government will pay a minimal amount. I can't remember how it's administered though, sorry.