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Receivership
A receivership is a remedy available to secured creditors (typically a bank or financier) to recover amounts outstanding under a secured loan in the event the company defaults on its loan payments. A Receiver may also be appointed in a shareholder dispute to complete a project, liquidate assets, or sell a business.
There are two main types of Receivership:
- A ‘Privately Appointed Receivership’ whereby a secured creditor appoints a Receiver by executing a document under its security agreement; or
- a ‘Court Appointed Receivership’ where a Court makes the appointment.
Only a licensed liquidator can act as a Receiver.
Privately appointed receivers will generally only act on behalf of the secured creditor that appointed them and will realise the assets specifically covered by the loan agreement. Alternatively, court appointed receivers are officers of the Court and act on behalf of all creditors. The powers and rights of court appointed Receivers are included in the Court order that appointed them.
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The Receiver is appointed to take possession of and sell or liquidate the assets secured by the security agreement in order to repay the outstanding debt owed to the secured creditor.
In a receivership, a secured creditor or the Court may also appoint a Receiver-Manager to operate and manage the business until it is sold as a going concern.
The Receiver’s duties are primarily owed to the secured creditor who appointed them, as well as to ASIC in relation to the status of the receivership. While the Receiver’s primary responsibility is to the secured creditor, the Receiver must also take into account the interests of the general body of creditors when exercising their duties.
Generally, the Receiver is tasked with selling the assets secured under the security agreement. After deducting the receivership’s fees and expenses, the Receiver then distributes the proceeds from the sale to the secured creditor, pursuant to their charge. Upon satisfaction of the secured creditor’s charge, the control of the Company is handed back to its directors.