Receivership

What is receivership? 

Receivership occurs when a receiver is appointed by the court or by a secured creditor who holds a security interest over some or all of the corporation’s property or assets. A security interest could be a mortgage over land or an all present and after acquired property (ALLPAAP) on the Personal Properties Register. The receiver’s role is to protect or sell the secured creditor’s assets to recover part or all of the debt owed to the secured creditor. 

In some cases a receiver is also appointed to manage the corporation’s business affairs, and is known as a receiver and manager. 

Read more about the process for creditors or what happens during receivership for employees. 

 

Common questions about receivership

No. The process allows a secured creditor to recover an outstanding debt due to it by the corporation without having to place the corporation into liquidation. The corporation has a chance to pay the debt owed to the secured creditor and return to trading as normal. 

A secured creditor or the court. 

If a director is a secured creditor, they can appoint a receiver. 

A secured creditor is a creditor who holds a security interest in some or all of the corporation’s property.

A security interest is a legal claim on property that secures payment or performance of an obligation by the corporation to the secured party. The interest will be set out in the form of a security agreement. Examples include:

  • a lease of goods
  • mortgage
  • charge over goods
  • conditional sale agreement 

No. The appointment of a receiver is made by the secured creditor (or by order of the Court).

The secured creditor will enter into an appointment document with the receiver directly. There is no need for the directors to do anything as part of the appointment process. 

This depends on the powers of the receiver set out in the security agreement or court order and the extent of the assets over which the receiver is appointed. Control of the secured property is taken away from the directors and given to the receiver. 

If the appointment is over the majority of the corporation’s assets, the receiver will effectively have control of the business. The directors though will still have responsibilities and duties. 

Yes. The directors have to help the receiver in various ways including:

  • telling the receiver where the corporation’s property is
  • giving the receiver property that is in the possession of the directors
  • telling the receiver where the books and records are or giving the receiver the corporation’s books and records
  • providing the receiver with a report on the corporation’s activities and property (known as a ROCAP) within 10 business days of the appointment of the receiver, and
  • meeting with the receiver or providing information to the receiver when requested. 

There is no set time. It may last a few weeks, months or even years.

When the receiver has sold enough of the secured property to repay the debt owed to the secured creditor. When that happens the receiver will resign or is discharged by the secured creditor.

If there is no other ongoing insolvency process (such as administration) then full control of the corporation and any remaining assets goes back to the directors. 

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