Receivership is a legal process where an external party is appointed to sell or safeguard the assets of a company or business. The external party is called a Receiver if the role is simply to sell assets, or a Receiver and Manager if the role is extended to managing a business. The Receiver can be appointed by a Secured Creditor, usually a Bank, or the Courts.
What does a Receiver do?
A Receiver’s role is to sell assets for the benefit of the Appointor, usually a Bank. In the case of a Receiver and Manager, the role includes managing and trading a business. If the Court has appointed a Receiver usually the role is to safeguard assets.
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.
What is a Secured Creditor?
Typically, companies require finance for their activities and in most cases the finance or loans are provided by a Bank. In consideration for providing a loan the Bank will usually ask for “security”. That is, the company agrees that if it defaults on repayment, then the Bank can take those assets and sell them. So in this example, the Bank is a Secured Creditor.
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. Since the Global Financial Crisis, Banks have appointed Receivers twice as often they did in the 5 years prior to the GFC.
How is a receiver different to a liquidator and voluntary administrator?
The appointment of a Receiver is made either privately, usually by a Bank, or by the Court. A Receiver can be appointed even if the company and its directors are opposed to the appointment.
In contrast, a Voluntary Administration is initiated by a director with a view to saving a business or company. Similarly, a Creditors Voluntary Liquidation is initiated by the directors and shareholders of a company with a view to winding up its affairs. A liquidator could also be appointed by the Court.
The main difference between a Receiver and all other types of appointment is that the Receiver has an overriding responsibility to look after the interests of the Secured Creditor. Liquidators and Voluntary Administrators have wider responsibilities to other creditors and even shareholders.
What is a Controller?
The Corporations Act also covers persons who are referred to as “controllers”. A“Controller” is a catch-all term referring to 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.