Receivership

The process for receivership:

1. The creditor has a legal charge over the company as security against debt owed.
2. The creditor may have a contractual right to appoint a receiver, otherwise they apply to the courts.
3. The receiver is appointed.
4. The receiver takes control of the company and the directors no longer have control of the company.
5. The receiver takes whatever action necessary to recover the debt for the creditor that appointed them.
6. In most cases the company will be liquidated when the receiver has carried out their duties to the creditor that appointed them.

 

What is Receivership? Receivership Explained

Receivership, sometimes called administrative receivership, is a specific type of corporate insolvency proceedings which occur when a company has defaulted on a debenture that was created before 15 September 2003. The creditor appoints a receiver to take control of the company with the aim of selling the company's assets or taking other actions to repay the debt.

It should be noted that, unlike administration which is a different procedure, receivership or administrative receivership is solely concerned with repayment of the debt owed to the creditor that appointed the receiver. The receiver is not attempting to turn the company around or allowing it to continue trading.

Since the Enterprise Act 2002 receivership is now much less common than administration.

Once the receiver has been appointed, the receiver takes over control of the company. The receiver can sell the business or parts of the business. If keeping the company trading appears to present the best chance of recovering the creditor's debt the receiver may decide that the company should continue trading under a company voluntary arrangement (CVA).

 

Receivership Notices

The following is a list of Notices that can be published during the process of receivership and what they mean:

2421 Appointment of Administrative Receivers (Notice 2421 under Receivership). This notice is placed by the administrative receiver and gives details of the date of appointment, name and address, and contact details of the receivers.

2422 Meetings of Creditors (Notice 2422 under Receivership). This notice is placed by the administrative receiver giving notice of the time and date and location for a meeting of creditors where the administrative receiver will present a report detailing the circumstances leading to their appointment, a statement of affairs outlining the financial position, and explaining various potential outcomes for creditors.

2423 Appointment of Receivers (Notice 2423 under Receivership). This notice is placed by the administrative receiver giving the address to which unsecured creditors of the company should write to request copies of the report.

2424 Deemed Consent (Administrative Receivership). (Notice 2424 under Receivership). This notice is placed by the administrative receiver seeking approval from creditors in respect of their proposals or a revision of the original proposals. The proposals will be approved unless the receivers receive objections from 10% or more of creditors.

 

See also corporate insolvency:

Administration

Creditors' Voluntary Liquidation (CVL)

Winding Up Petitions and Winding Up Orders

Members’ Voluntary Liquidation (MVL)

Receivership

Company Voluntary Arrangement (CVA)

Liquidation

Company Insolvency Procedures

Warning Signs of Insolvency