Receivership

A receivership is a process by which a creditor (usually a financial institution), who holds a charge on the assets of a company as security for its debts, appoints a Receiver to recover the money due to it.

The Receiver is usually appointed because the principal under a debenture is in arrears, the interest under a debenture is in arrears, or some other event has happened by which under the terms of the debenture the security has become enforceable.

The role of a Receiver appointed by a debenture holder is to take possession of the assets, subject to the debenture holder’s charge. Typically, the Receiver will then realise those assets and pay off the debenture holder. However, depending on the terms of the appointment, the Receiver might decide to continue trading with a view to increasing the value of the company’s assets or, alternatively, the Receiver might sell the business as a going concern.