What is Involved in a Receivership Appointment?

The appointment of a receiver is usually the first step in a company’s path to receivership. All of their assets and the parts of or the whole business itself may be sold off to recover debts.

Who Does the Appointing?

A secured creditor (usually a bank) will apply for the appointment of a receiver so that assets may be sold to repay a debt owed to them.

The receiver’s duty is to the secured creditor however they may inform other creditors of their appointment. A receiver must distribute funds in the order required by law and report to ASIC any possible offences or irregularities they have found. They are responsible for gaining market price or the best price possible for assets when liquidating.

Role of Receivers and Receiver/Managers

Depending on the business, a creditor may appoint a receiver or a receiver manager. A receiver manager is responsible for liquidating assets as well as managing the business. Divisions of a company may be sold off. The powers of a receiver are listed in the charge document and under the Corporations Act. They have the same duties as a director. A receiver must lodge detailed receipts and payments to ASIC every six months. The receiver will prepare a report for the secured creditor which unsecured creditors may not be privy.

The receivership is usually complete when the receiver has sold enough assets to repay the secured creditor and paid the receivership liabilities. The receiver resigns or is discharged by the secured creditor. Control and the remaining assets are returned to the company unless an external administrator has been appointed.

If the receiver has been court appointed, their primary role is to safeguard assets and to look after the interests of creditors and shareholders until the Court can resolve matters. Directors’ powers are suspended and they cannot manage the company.

A receiver will not attempt to restructure a company in an attempt to save it as their focus is on debt recovery. Once a receiver is appointed it is usually too late for directors to restructure the company.

Other Roles

A liquidator may be appointed at the same time as a receiver. The role of the liquidator is to look after the interests of all creditors and the company while the receiver is concerned only with the secured creditor’s interests.

If directors take action before a receiver is appointed, it is referred to as voluntary administration. Directors will usually do this in an attempt to save the business or company.

A controller is another term for a receiver or receiver manager. Under the Corporations Act they are in control of a property and can enforce a charge.

An external administrator also known as an insolvency practitioner is a person appointed to a company or its property to undertake the role of provisional liquidator or liquidator, a voluntary administrator, deed administrator, controller, receiver or receiver and manager.