If a company is in financial difficulty, a receiver may be appointed to take control of some or all of its assets to ensure the payment of secured creditors.
A secured creditor or the Court can appoint a Receiver – usually under the terms of a security document such as a General Security Agreement. The receiver’s job is to receive and realise the company’s assets, then distribute the proceeds to the secured creditor. Receivers and Managers also have the power to manage a business.
It is common for a Receiver and Manager to be appointed to a company at the same time as a voluntary administrator. The Receiver and Manager acts for the secured creditor, while the voluntary administrator looks after the interests of the whole body creditors.
In cases where there is a dispute stakeholders, the Court may appoint a Receiver or Receiver and Manager. This enables the dispute to be resolved by an independent party and often requires a detailed examination of the financial records of the business and the disposal of the business’ assets.
The Receiver, or Receiver and Manager’s role includes:
- Undertaking an immediate assessment of the assets available for realisation and settlement of the debt owing to the secured creditor.
- Reporting back to the secured creditor on a regular basis the results of investigations and details of current trading.
- Realisation of the secured assets either individually or by sale of a business as a going concern.
- Payment of the secured debt and any other debts with preferential entitlement, such as employee entitlements.
Jirsch Sutherland has wide-ranging experience acting as Receivers, or Receivers and Managers, for financial institutions and other secured creditors and also with court appointments to resolve partnership disputes.