Receivership

Welcome to Dissolve, Experts in Receivership

Receivership is where a business has a receiver appointed by creditors or the Courts to take charge of the affairs of the business.

What does a Receiver do?

A receiver’s role is to sell assets for the benefit of the Bank. It is almost always the death of the company. The Receiver is not there to look after the company or the Directors. If a Bank ever tells you they may appoint a Receiver then it should be a call-to-action for the Directors. Your company’s problems can no longer be mulled, considered or strategized. YOU NEED TO CALL US NOW.

Is your Bank planning to appoint a Receiver?

If so, YOU NEED TO CALL US NOW to get CONFIDENTIAL FREE ADVICE. Be aware that the Receiver will be there to look after the bank, not the directors and not the company. You need someone representing your interests.

My bank is making threatening noises what should I do?

If your business is in trouble and the relationship with the bank is breaking down, we suggest that you look carefully at the guides in this site. Work out the viability of the business, can you trim costs? Work out the problems, set out the position and have a meeting of directors.

Decide if the business can continue but needs to be restructured, or if it is just not viable then consider Voluntary Administration or Liquidation.

Receivership should not be confused with Administration. A receiver is appointed by a floating charge holder – this is typically a bank. What does this mean?

• 1. The company requires finance for its activities and borrows from a bank (or other secured lender).
• 2. In consideration for providing the loan the bank requires security. Normally the company will sign a debenture with a fixed and floating charge. This allows the bank security over the assets of the company.
• 3. If the terms of the agreement are breached or the company does not conform to the bank’s wishes the charge holder can:
  • a) Appoint investigating accountants to ascertain how secure or not the bank’s debt is and what is the best route forward (not always receivership).
  • b) Demand formal repayment of the loans without notice.
  • c) Appoint a receiver to administer and receive the company’s assets.
• 4. The receiver has a duty to collect the bank’s debts only; he/she is not generally concerned with the other unsecured creditors or shareholders’ exposure.

If that sounds like your situation please call us now on 02 9290 2220 for confidential free advice on Company Receivership. If not, try the following other options for companies in distress:

Voluntary Administration

Voluntary Administration places an insolvent company in the hands of an independent person who can assess all the options available to generate the best return for creditors and shareholders. In some cases, the owner may be able to retain control or a part share in the business. In other cases the business can be sold as a going concern and employees may be able to retain their jobs.

For more information on Voluntary Administration, please see our sister site Restructuring Works, which provides advice to directors of companies in financial distress.

Voluntary Liquidation

A Voluntary Liquidation is a liquidation that is supported by the company’s directors, as opposed to a liquidation mandated by the Court.

The Law allows two approaches to a liquidation depending on whether your company is solvent or insolvent (Try our test if you are unsure):

• Insolvent Companies require a Creditors Voluntary Liquidation. Sometimes a company is just not viable and must be liquidated. At Dissolve we can place a company into liquidation in a matter of hours and then complete the liquidation quickly, efficiently and at a very low fee.
• Solvent Companies require a Members Voluntary Liquidation. Simplifying your corporate structure by disposing of redundant companies can eliminate annual return fees, reduce your cost of compliance and simplify the consolidation process, amongst other cost savings.

Liquidation is a complicated area so we have provided a bundle of information on this website – just see the menu above. If you can’t find what you are looking for there why not CALL US NOW for confidential, free advice.

How often do banks appoint receivers?

You have probably heard that Banks don’t like to appoint Receivers. The Bank may have even told you that. Well it’s true. Banks don’t like to appoint Receivers, but they will do it and they do it often.

In 2008 Banks appointed Receivers twice as often as they did in each of the previous five years. Banks appointed Receivers, or took possession of company assets, 957 times in 2008.

We still meet Directors who think they’ll be able to restructure their company after the appointment of a Receiver. That will not happen. A Receiver will sell assets for the best price offered and the money will go to pay the company’s debt to the Bank. A Receiver does not try and restructure the company – he just sells assets. If the sale of assets doesn’t fully pay off the debt to the Bank, and if you have given a personal guarantee to the Bank, then you will be liable for the shortfall to the Bank.

Is the Bank Appointing an Investigating Accountant?

Have you been informed that your company is facing an investigation by “reporting accountants” or “investigating accountants”? If yes, this will have significant implications for your company.

When a business has financial or operating difficulties it can often breach its borrowing facilities from the bank or from factoring companies. This can lead to bounced cheques, problems with the payments of direct debits or missed loan repayments. Banks have quite sophisticated systems for monitoring this risk, but often they are “in the dark” with regard to the up to date financial performance of the company that owes it the money. One way of addressing this is for a bank to have the ability to demand detailed and up to date information from your company. The loan agreement you have signed will usually allow for this. So if a bank has concerns over the quality or timeliness of information they have received regarding your company they may appoint an Investigating Accountant.

This step, when taken by the bank, usually means you are already on the path to liquidation, whether you wanted that or not. It is very important for you to retain control of the process.

How is a receiver different to a liquidator and voluntary administrator?

Often there will be a Voluntary Administrator or a Liquidator appointed to a company at the same time as a receiver. They each have different roles. The difference between a receiver and a liquidator is that a receiver’s main duty of care is to a secured creditor, which is usually a bank, whereas a liquidator is concerned with all of the affairs of a company and all of its creditors.

Who appoints a receiver and how is it done?

The appointment of a Receiver is made either privately, usually by a bank, or by the Court. Private appointments are by far the most common. They are made either under the powers contained in a Mortgage document, Debenture Deed or under powers in Real Property legislation.

The powers of a receiver are set out in the document that allowed the appointment of the receiver. However, the receiver also has additional powers under section 420 of the Corporations Act. The receiver’s main role is to take possession of assets and to manage and realise the assets for the benefit of the secured creditor. The receiver must ensure that all care is taken to sell the property for its market value or the best price that is reasonably attainable.

What is a Controller?

The Corporations Act also covers persons who are referred to as “controllers”. The term is defined as a receiver, or receiver and manager, of that property or anyone else who is in possession, or is in control of that property with the purpose of enforcing a charge.

So the Corporations Act also deals with mortgagees and their agents who enter into possession of secured property owned by a company or who assume control of the property.

What is a Court Appointed Receiver?

A Court Appointed Receiver is appointed pursuant to section 1323 of the Corporations Act. The primary role of a Court Appointed Receiver depends on the specific Order made by the Court.

This form of appointment is not as common as a private appointment. It is normal for such an appointment to be made where the Court sees that it is desirable to protect the interests of creditors and shareholders and to preserve the assets of the company until specific matters are resolved by the Court. Insolvency is not a pre-requisite to this type of appointment and more often arises as a result of a partners’ or shareholders’ dispute. Upon the appointment of a receiver by the Court the powers of the directors to administer a company are suspended and they will be excluded from the management of the company.

If the Bank is threatening to appoint a receiver you should CALL US NOW for CONFIDENTIAL FREE ADVICE on your options.