Business & Company: Insolvency & Liquidation - Guides
Insolvency & Liquidation
9. Receivership
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Last updated: 11 Aug 2015
- A company typically enters receivership when a receiver is appointed by a secured creditor with security over one or more of the company’s assets.
- The receiver’s main role is to collect and sell enough of the secured assets to repay the debt owed by the company to the secured creditor.
- The receiver’s main duty then is to the remaining secured creditors and then to unsecured creditors.
- The receiver’s main duty to unsecured creditors is to take care when selling property to ensure it is sold for at least market value or for the best price possible.
- In discharging their duties the receiver must fulfil the same general duties of a director.
- As legal action may be commenced against the company during a receivership an unsecured creditor with an unpaid debt is not prevented from filing a winding up application.
- Any funds which become available through the receiver’s sale of assets must be distributed in the following manner:
- funds from the sale of fixed charge assets are paid to the secured creditor after the fees and expenses of the receiver have been paid; and
- funds from the sale of floating charge assets are paid as follows:
- firstly to the receiver for their fees and expenses in recovering the funds;
- secondly certain priority claims including any employee entitlements; and
- thirdly repayment of the debt owed to the secured creditor.
- In both cases any remaining funds are paid to the company or its other formal administrator for example its liquidator if one has been appointed.
- The receiver is not required to pay any other unsecured creditors for outstanding pre-appointment debts. The receiver is also not required to report to unsecured creditors although typically they will inform the company’s suppliers of their appointment.
- The receiver is required to lodge a list of their receipts and payments with ASIC twice yearly. Copies of these can be can be obtained from ASIC for a fee.
- A receivership usually ends when the receiver has:
- sold all or enough of the secured assets to repay the secured creditor;
- satisfied all of their duties; and
- paid their receivership liabilities.
- Generally the receiver either resigns or is discharged by the secured creditor after which time unless another formal administrator has been appointed control of the company and any remaining assets returns to the company’s directors.
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