We have collated the most frequently asked questions in one place to help you find quick answers to important matters.
Receivership is the process where a receiver is appointed by a secured creditor (usually a bank) that holds security over some or all of the company’s assets. The receiver’s appointment is usually subject to the terms of a charge such as a mortgage over the company’s assets.
A receiver will collect, sell, and distribute money to creditors in accordance with the law. It is important to note that being in receivership does not necessarily mean that a company will go into liquidation and cease to exist. In fact, the company may well survive and succeed after the receivership ends.
The role of a receiver revolves around three key areas
If your bank is planning to appoint a receiver it is likely that you have been unable to pay your debts on time. In this circumstance, the creditor is the bank that holds an interest in one of your non-circulating assets. This may include property, land, plant, or equipment.
The role of the receiver is to act on the behalf of the creditor (bank). It is important to protect your own interests and the best way to do so is by obtaining professional advice and representation.
Read more about Australian Debt Solvers receiverships services and how we can help.
A secured creditor is an entity that holds a secured interest in some or all company’s assets. This is usually in the form of a mortgage. Companies regularly obtain finance in the form of a loan and in the process provide company assets as a form of ‘security’. In this case, the financial institution that provided the loan is a secured creditor.
There are several key differences between the three and they are made clear in the roles carried out by each party.
Read more about the difference between receivership, administration, and liquidation.
‘Controller’ refers to a person who is in control of a property for the purpose of enforcing a mortgage or charge. A receiver is commonly referred to as a controller. Read more about the receivership
Company directors will continue to hold their positions during receivership but it is their powers and responsibilities which change. The extend of these changes will depend on the power's granted to the receiver and the assets which they control during the receivership period.
Directors must provide the receiver with a Report on Company Activities and Property as per ASIC guidelines. They must also provide the receiver with full access to books and records about the secured assets.
One of the key roles of a receiver is to collect and sell assets in order to obtain money to pay off debts. Once money from the sale of circulating assets (liquid assets such as stock) is collected, it is then paid out in the following order:
If there are any funds remaining, they will be paid either to the company or any other external administrator (if applicable).
In most circumstances receivership is not a choice made by directors but rather appointed by a secured creditor such as a bank. The options of directors are limited during this process which is why it is important to be proactive if your company is experiencing financial stress.
In many circumstances, directors may be able to maintain control while attempting to return the company to a position of financial strength.
If you are concerned about your business, Contact Us today for a free consultation.
If you haven't found the answers you are looking for, do not hesitate to reach out to us to receive free professional advice. We deal with a wide range of cases, including liquidation, insolvency, voluntary administration, and personal bankruptcy. Send us a direct message and we will be in touch with you within 1 hour.
Want to learn more about receivership or how to appoint a receiver and manager? Check out the Australian Debt Solvers Resource Centre featuring detailed information from industry professionals.
Want to learn more about the receivership process and legal requirements? Expand your knowledge and understanding by taking a closer look at real-life case studies.