Receivership is an immediate remedy that is available to secured creditors that hold a charge over all the present and after-acquired assets of a company. These charges are typically referred to as General Security Agreements (GSA’s) and will usually include the right to appoint a receiver over the company’s assets in the event of a default.
Where a receiver has been appointed by a GSA holder the directors cease control of the company, the receiver will run the business for the benefit of the creditor that appointed them. An appointed receiver acts to realise assets of the company to repay the GSA holder. In the event, there are surplus assets after the GSA holder has been repaid these will be returned to the control of the directors of the company.
Typical GSA holders are financial institutions such as banks and finance companies while private individuals can also possess a GSA over a company’s assets. Irrespective of who the appointing secured creditor is, a receiver must act quickly to take control of the company’s assets as they are personally liable for expenses incurred while appointed as receiver. The benefit of a receivership over liquidation is that the appointment and effect of a receiver is immediate without having to wait to go to Court as is the case with a liquidation.
If you are a GSA holder of a company and need to discuss your enforcement options, please contact us to discuss your enforcement strategy.
Other areas in Receivership: Asset Recovery
