Insolvency Act 1986, section 44

Agency and liability for contracts

Part III Receivership

(1)The administrative receiver of a company—

(a)is deemed to be the company’s agent, unless and until the company goes into liquidation;

(b)is personally liable on any contract entered into by him in the carrying out of his functions (except in so far as the contract otherwise provides) and [F131, to the extent of any qualifying liability,F131] on any contract of employment adopted by him in the carrying out of those functions; and

(c)is entitled in respect of that liability to an indemnity out of the assets of the company.

(2)For the purposes of subsection (1)(b) the administrative receiver is not to be taken to have adopted a contract of employment by reason of anything done or omitted to be done within 14 days after his appointment.

[F132 (2A)For the purposes of subsection (1)(b), a liability under a contract of employment is a qualifying liability if—

(a)it is a liability to pay a sum by way of wages or salary or contribution to an occupational pension scheme,

(b)it is incurred while the administrative receiver is in office, and

(c)it is in respect of services rendered wholly or partly after the adoption of the contract.

(2B)Where a sum payable in respect of a liability which is a qualifying liability for the purposes of subsection (1)(b) is payable in respect of services rendered partly before and partly after the adoption of the contract, liability under subsection (1)(b) shall only extend to so much of the sum as is payable in respect of services rendered after the adoption of the contract.

(2C)For the purposes of subsections (2A) and (2B)—

(a)wages or salary payable in respect of a period of holiday or absence from work through sickness or other good cause are deemed to be wages or (as the case may be) salary in respect of services rendered in that period, and

(b)a sum payable in lieu of holiday is deemed to be wages or (as the case may be) salary in respect of services rendered in the period by reference to which the holiday entitlement arose.

F133(2D). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F132]

(3)This section does not limit any right to indemnity which the administrative receiver would have apart from it, nor limit his liability on contracts entered into or adopted without authority, nor confer any right to indemnity in respect of that liability.

Definitions used in section 44 3

administrative receiver

(2) In this Chapter “administrative receiver” means—

(a)a receiver or manager of the whole (or substantially the whole) of a company’s property appointed by or on behalf of the holders of any debentures of the company secured by a charge which, as created, was a floating charge, or by such a charge and one or more other securities; or

(b)a person who would be such a receiver or manager but for the appointment of some other person as the receiver of part of the company’s property.

Defined in s.29(2) · see it in the full Act
the company

2 Section 233B does not apply in relation to a contract for the supply of goods or services to a company (“the company”) where any of paragraphs 3 to 11 applies.

Defined in Sch.4ZZA para.2 · see it in the full Act
company

(1) In this Chapter “company” means a company registered under the Companies Act 2006 in England and Wales or Scotland.

Defined in s.28(1) · see it in the full Act

Cases considering section 44 6

Rees v Boston Borough Council

[2001] EWCA Civ 1934 · 20 December 2001Limits

Limits the administrative receiver's statutory agency to the period before liquidation. The court held that cessation of agency did not itself change rateable occupation, because the receivers' unchanged management activities did not amount to occupation by them. (see "The arguments before Jacob J"; "Conclusions").

Granada UK Rental & Retail Ltd & Ors v The Pensions Regulator

[2019] EWCA Civ 1032 · 20 June 2019

Administrative receivers act as agents of the company whose assets are subject to the receivership. Their control of voting decisions therefore did not displace the registered shareholder’s statutory entitlement. (see paras [118]; [130])

Edenwest Ltd v CMS Cameron McKenna (A Firm)

[2012] EWHC 1258 (Ch) · 14 May 2012Defines

The court treated section 44(1)(b) as recognising a receiver’s ability to exclude personal liability on contracts entered into while carrying out receivership functions. The sale documents therefore protected the receivers against personal liability to the buyer, but did not release their equitable duty to the company. (see para [42])

1 more judgment, and what each says about section 44, are in the case-law panel in the full Act.

Amendments and notes

3 notes from legislation.gov.uk

Amendments

  1. F131Words in s. 44(1)(b) inserted (24.3.1994 with effect in relation to contracts of employment adopted on or after 15.3.1994) by 1994 c. 7, s. 2(2)(4)
  2. F132S. 44(2A)-(2D) inserted (24.3.1994 with effect in relation to contracts of employment adopted on or after 15.3.1994) by 1994 c. 7, s. 2(3)(4)
  3. F133S. 44(2D) omitted (26.5.2015) by virtue of Deregulation Act 2015 (c. 20), s. 115(3)(n), Sch. 6 para. 26