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RECEIVERSHIP

The expert team at Inquesta are equipped to help guide your business and assist you in the face of receivership.

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Types of Receiverships

There are three main types of receiverships that exist; Fixed Charge Receiver (also known as LPA Receiver), Administrative Receivership, and Court Appointed Receiver. Although they are less common than they used to be, receiverships still remain a valuable tool to help creditors recover what they are owed.

Here are the types of receiverships in more detail:

Fixed Charge Receivership (also known as a Law of Property Act Receivership) refers to a tool utilised by lenders to recover their debt once the debtor defaults on their loan.

This form of receivership involves the creditor taking control over whatever asset the debtor used the loan to purchase, and appointing a receiver to manage it. This is usually done by selling the asset, or setting up the rental of a property to create a steady flow of income to help pay off the debt.

Administrative receivership allows for a secured creditor the ability to appoint a licensed insolvency practitioner, who is granted the power to manage and sell any and all of the company’s assets (commonly property) up to the value of the debt, in order to repay the creditor.

The appointment of an administrative receiver will not prevent other creditors from taking action against the company, including winding up petitions and further sanctions.

Court-Appointed Receivership involves the appointment of a totally neutral third-party receiver by the appointing court. They will work with the best interests of both the company in debt and its creditors to attempt to reach a mutually-beneficial resolution, should one be possible.

This means that a court-appointed receiver will aim to repay all company debt, while leaving the business in a position to continue its regular day-to-day operation with as little interruption as possible.

How Insolvency Practitioners Help with Corporate Receiverships

When appointed to a receivership case, a licensed insolvency practitioner assumes the role of receiver. Their goal is to ensure that the indebted company can find a way to repay what it owes, while preventing the lender from losing out on the value of the initial loan. Ultimately, their responsibility lies with the creditor.

Although an insolvency practitioner will always want to save a struggling business wherever possible, the fact that key assets are sometimes sold off during the receivership process means there is often not much left for the company to sustain itself with. As a result, receiverships will often result in liquidation.

The main duties of a receiver include assessing the company’s future prospects and figuring out a pathway for it to escape financial distress. They must also secure and realise the firm’s assets, while managing its affairs to ensure that all debts are paid. This involves removing directors or employees if necessary. All strict protocols and regulations must be followed to the letter.

Download our FREE Guide to Liquidation

While a partnership voluntary arrangement does offer a lifeline for struggling partnerships, it’s by no means guaranteed to succeed in every case. If the partnership is unable to meet the terms of repayment, or it becomes clear that recovery is no longer viable, the next steps may be to consider closure, including liquidation options. 

Liquidation involves winding down the business and distributing assets to satisfy creditors. It’s a complex process, with various legal and financial implications — understanding this is key. For a comprehensive guide on what liquidation entails, download our dedicated Liquidation guide to learn more.

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The Company Receivership Process

From the initial intervention, to key reports, through to the final repayment of debt and the end of the company’s receivership, the receivership process can be full of speed bumps that can have a lasting impact on your business. It is important that you understand the process, so you know what to expect, and what is required of you throughout.

Bank Intervention

A bank will typically intervene and start the receivership process if a significant length of time has passed without the debt being paid. They will also likely request further security for their investment from company directors, usually in the guise of personal guarantees. The bank may also request additional capital be introduced by directors and shareholders, a new business plan be enforced to take into account the money owed, and more.

If these requests are refused, or the lender is not satisfied with the company’s repayment efforts, they will likely approach and appoint a licensed insolvency practitioner to assess the debtor’s operations. Depending on the circumstances of a case, a bank may decide to appoint an administrator instead of going down the receivership route.

Receiver Appointed

A receiver is appointed by the holder of a security interest. This is important to bear in mind from the point of view of shareholders and other creditors of the company. The courts tend not to get involved in the process of appointing a receiver, but are the only body with the power to remove a receiver.

An administrative receiver must be a licensed insolvency practitioner. If your company finds itself in a fixed charge receivership, the receiver would not need to be a licensed insolvency practitioner, and can instead be a chartered surveyor.

End of Receivership

Receivership comes to and once the receiver has managed to recover the total amount of money owed to the creditor. Once this has been achieved, the receiver will stand down and the business is able to assess what its future options are.

The role of a receiver requires them to assess the situation in order to ensure that the company’s recoverable assets are at peak value in order to be able to repay creditors as efficiently as possible, while also limiting the long-term damage to the business.

How Inquesta Can Help with Receiverships

Inquesta boasts a team of expert insolvency practitioners who have the knowledge and experience required to assist you no matter your need.

With decades of experience under their belt assisting companies with all manner of corporate insolvency related issues, including receivership, the Inquesta team is perfectly placed to help.

We know the receivership process inside and out. When you work with Inquesta, you know that everything we do is to help get the best result possible for you and your business. A no-nonsense approach that you can rely on.

Whatever your situation, the Inquesta team can guide you through the entire process. To find out more about how we can help, get in touch with our team today.

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Our Specialist Team

The expert team at Inquesta are trained to the highest standard in the industry to help keep the receivership process as smooth and stress-free as possible.

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Steven Wiseglass

Director of Insolvency

A co-founder of Inquesta, Steven is a licensed Insolvency Practitioner with over a decade of experience in the field. He is a member of the Insolvency Practitioners Association, Association of Business Recovery Professionals (R3), and his insolvency licence is issued by the Insolvency Practitioners Association. In addition, he sits on the R3 committee of the North West Regional Committee.

Steven specialises in advising directors of small to medium-sized businesses, and has a wealth of expertise in providing the most appropriate advice whatever the firm’s circumstances may be. He has also been instrumental in helping company directors save their business and rebuild them into successful enterprises.

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FAQs

The key difference between receivership and administration is often how much the process can affect the long-term future of the business involved. Administration can represent an opportunity for reshaping operations and methodically paying back the debt according to a plan. A receivership, however, can result in certain actions being taken in order to expedite a positive result for the creditor.

For example, a receivership can sometimes involve a company’s assets being sold at a discounted rate, just so the creditors can be repaid quickly. This may put the indebted business in more jeopardy, as there will be considerably less room for manoeuvre.

The main difference between a fixed charge receiver and an administrative receiver is when it comes to the scope of their role. The former will only deal with the asset in question, whilst the latter will take care of all the company’s assets that fall under the fixed and floating charge.

A fixed charge receiver, unlike an administrative receiver, is also not required to be an officially licensed insolvency practitioner. They are more widely chartered surveyors due to the specific needs of the role.

Receivership can offer a struggling business a potential lifeline to get their affairs in order, while also remaining open. Liquidation, on the other hand, simply involves the closure of the company and the selling of its assets to repay debt. An insolvent company in liquidation will also not be able to trade.

A company who enters into receivership does not lose control over their operations and can therefore still send out invoices and trade without any problem. The only thing that a business loses control over when in receivership is the particular asset at the centre of the matter, which will be controlled by the receiver.

Once a business has entered into receivership it can become incredibly difficult to get out without the explicit agreement of the receiver. It is possible to speak to the lender and negotiate alternative terms that may suit both parties, but it should be noted that they may not be interested.

It is possible to avoid receivership before it officially goes through by voluntarily entering into administration, this allows a moratorium on sanction and action by creditors and could buy your business time to take stock and formulate an action plan.

Also in Company Insolvency & Recovery

Administration

Business Recovery

Company Voluntary Arrangement

Liquidation

Solvent Winding Up

Statutory Demand

Winding Up Petition

Bounce Back Loans

Court Bailiff Action

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