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This chapter considers the twin institutions of the floating charge and administrative receivership. It explains the distinctive role played by the floating charge by examining the empirical context in which it operates and by comparing the recoveries made by different classes of creditor in corporate liquidation. The analysis suggests that whereas the fixed charge in included in debentures so as to provide its holder with priority, the floating charge is a residual management displacement device. Its dominant role is to ensure the integrity of the debtor's estate when the latter becomes distressed and its management is displaced in favour of a specialist distress-oriented manager. This is where administrative receivership (‘receivership’) comes in. Traditionally, the replacement of the distressed company's management has been brought about by the appointment of a receiver (formerly, a receiver and manager). However, the chapter harnesses theory and evidence in favour of the argument that receivership is significantly destructive of social value, and that it is unfair and oppressive. Its virtual abolition by the Enterprise Act 2002 is therefore welcomed. However, the substitution of receivership with administration also, it is argued, signals the end of the usefulness of the floating charge. The chapter concludes by sketching out a case for the abolition of this type of charge.

Building on the understanding gained by the discussion in Chapter 6 of the socially harmful features of administrative receivership, this chapter discusses the administration procedure introduced by the Enterprise Act 2002. It explains how this procedure retains the only defensible feature of receivership, in that a selected creditor continues to be entrusted with the right unilaterally to displace the underperforming management of a distressed company. The chapter analyses the statutory hierarchy of objectives made available to the administrator and explains the standard to which he is expected to be held in choosing between them. Light is also thrown on the sort of factors that might justifiably be taken into account in making this choice. The relationship between the administrator's duties and the voting rights of creditors is examined. The chapter concludes with a discussion of the sort of factors that might precipitate challenges by aggrieved creditors and members to the administrator's decisions and actions.