Corporate Insolvency  >  Receivership

The Enterprise Act 2002 takes steps toward abolition of receiverships although a lender who holds a bond and floating charge granted by the company before the effective date of the new legislation (15 September 2003) will continue to have the opportunity to appoint a receiver.

A receiver is appointed by the holder of a bond and floating charge, usually a bank. The bond and floating charge is held over the company assets in respect of the funds advanced to the company. There are many reasons why it may be appropriate for a receiver to be appointed and, historically, it has been the preferred route for a bank when it wishes to have reasonably close control over the insolvency process, when compared to a liquidation. A receiver is an agent of the company with the primary purpose of looking after the interests of his appointer whereas a liquidator is appointed for the benefit of all creditors. This often explains why a receiver and liquidator can be seen to take different courses of action in similar circumstances and, for example, certain legal procedures for asset recovery are only available to a liquidator.

If the option of receivership is raised/discussed by the holder of a floating charge the directors are encouraged to seek independent advice in order to ensure that they are acting in a responsible and practical manner.

For many people, receivership and liquidation are seen as interchangeable terms and, in reality, there are significant similarities in the processes.

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