When a company has borrowed money and provided security in the form of a fixed or floating charge over its assets. If the company defaults on the loan, the secured creditor can appoint a receiver to take control of the assets and recover the debts.
How Receivership Works
Appointment of a Receiver A secured creditor appoints an insolvency practitioner as an administrative receiver.
Control of Assets The receiver takes control of the company’s assets covered by the charge.
Business Review The receiver assesses whether the company can continue operating or if assets need to be sold.
Asset RealisationThe receiver either sells the business as a going concern or liquidates assets to repay the secured creditor.
Distribution of Funds Proceeds from asset sales are used to repay the secured creditor first, with any surplus going to other creditors where applicable.
Benefits of Receivership
Secured Creditor Protection Ensures that secured creditors can recover outstanding debts efficiently
Efficient Asset Realisation The receiver can sell company assets to repay creditors quickly.
Legal Protection Prevents further legal action from unsecured creditors while the receiver manages the company's affairs.
Debt Recovery Efficiency Enables lenders to reclaim funds without the delays of a full liquidation process.
Why choose Receivership?
Receivership is suitable if:
- If viable, the business may be sold with operations intact.
- If the business cannot be saved, assets are sold to repay creditors.
- If no viable recovery plan exists, the company may be wound up after receivership.