Receivership

ReceivershipThere are three forms of receivership:

Administrative Receivership

An Administrative Receiver, who must be a licensed Insolvency Practitioner, is appointed by the holder of a floating charge, normally a bank. The receiver’s primary duty is to the floating charge holder who appointed him, with only a secondary duty to the other creditors as a whole. The receivership is therefore conducted for the primary benefit of the charge holder.

The company very rarely survives this process, although often the core business is sold on. In the majority of instances there will be little or no return to any creditor other than the floating charge holder.

Fixed Charge Receivership

A fixed charge receivership, including an LPA Receivership, is where a secured creditor (e.g. a bank) holds a fixed charge, rather than a floating charge, over specific assets of a company. If the asset covered by the charge is land and buildings, the Receiver is usually appointed under the terms of the Law of Property Act 1925 and is referred to as an “LPA Receiver”. A Receiver is appointed over just the assets subject to the fixed charge, rather than the company as a whole, and has the power to sell those assets and pay the proceeds back to the fixed charge holder.

Court Appointed Receivership

These types of receivership are extremely rare. During a legal action or dispute the parties involved may wish to appoint an independent third party to protect and manage the asset(s) that are in dispute. An application is made to the Court for the appointment of a Court Appointed Receiver. The Court appoints the Receiver and specifies what powers the Receiver has over the assets which he will control. The Receiver need not be a licensed Insolvency Practitioner. The Receiver then deals with the asset in accordance with the terms of the resolution of the dispute.

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