ABSTRACT
Receivership is a procedure which is not implemented by the company but by a secured lender (or the courts) in accordance with the terms of the loan. While the procedure cannot be implemented by the company (despite reports in the press which often speak of a company ‘calling in the receiver’), it may be initiated by the company in conjunction with a creditor when the company recognises that it cannot continue to trade in its current format. This is not to say that the company can veto the appointment of a receiver, merely that a more orderly and timely process from the viewpoint of the troubled company may be achieved. Receivers may be appointed by a fixed chargeholder or by a floating chargeholder and in the latter case the receiver is called an administrative receiver and must be a licensed insolvency practitioner. The function of a receiver is to receive income or realise property to which the charge attaches to pay off the chargeholder. Receivership does not preclude a creditors’ or members’ petition to wind up the company being presented. Where a liquidator is appointed, the receiver remains in office and continues to manage and realise the assets to which the charge attaches but is monitored by the liquidator on behalf of the company’s creditors. After the receiver has satisfied his clients (the chargeholder), the liquidator disposes of any surplus assets, in compliance with the order of priority for the payment of creditors. If the charged asset is insufficient to meet the claims of the chargeholder, the balance of the debt is unsecured.
