What is receivership?

Receivership is the enforcement of security by the lender. It is important to note that the appointment of a receiver does not affect its status of the company.   

How is receiver appointed?

A receiver can be appointed by the terms of a debenture or by a Court. There are two types of a receive:

1.   An asset receiver: An asset receiver is a receiver who has been appointed on foot of a fixed charge over specified assets.  

2.   Receiver and Manager: A receiver and manager is appointed where the company has given both a fixed charge over specified assets and a floating charge over substantially all of its assets and undertaking.  If a receiver and manager is appointed, the powers of the directors are effectively suspended regarding the running the business concerned because all of the assets and business of the company are then under the control of the receiver. This can be compared to where a company has a fixed charge over certain specified assets only, as in this scenario, the directors maintain control over the other assets of the company.

What are the duties of receiver?

1. The power of sale of the charged asset.
2. Power of Attorney to execute Contracts by and on behalf of the company.
3. Act as agent of the company, thereby entering into Contracts on behalf of the company.
4. Duty to act in good faith and exercise an equitable duty of care.
5. Exercise his or her duty profitably.
6. The receiver must take all reasonable care to obtain the best price obtainable for the property subject to the charge at the time of sale.

Can a receiver be removed/resign?

A receiver can resign upon giving one months notice to the holder of a fixed and/or floating charge and to the company.   A received is generally released from his or her duties once he or she has realised the assets secured by the Charge, be it fixed or floating, and apply the proceeds as per the Lender’s instructions. A receiver may also be discharged upon retirement in which case another receiver will be appointed.     If a receiver has been appointed by the Court he must obtain the Court’s consent before resigning.