A company goes into receivership when an independent and suitably qualified person (the receiver) is appointed by a secured creditor, or in special circumstances by the Court, to take control of and sell some or all of the company’s assets to repay the debt owed to the secured creditor.
The charge, or security, held by the secured creditor under which the appointment of a receiver is made may comprise:
- a fixed charge over particular assets of the company (e.g. land, plant and equipment), and/or
- a floating charge over assets that are used and disposed of in the course of normal trading operations (e.g. debtors, cash and stock)
The receiver derives their powers from the security document through which they are appointed and the Corporations Act 2001. If receivers have, under the terms of their appointment, the power to manage the company’s affairs, they are known as receivers and managers.
It is possible for a company in receivership to also be in provisional liquidation, liquidation, voluntary administration or subject to a deed of company arrangement.
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