A company most commonly goes into receivership when a receiver is appointed by a secured creditor who holds security over some or all of the company’s assets. The receiver’s primary role is to collect and sell sufficient of the company’s charged assets to repay the debt owed to the secured creditor.
What is the receiver’s role?
The receiver’s role is:
to collect and sell enough of the charged assets to repay the debt owed to the secured creditor
if they have been appointed under a fixed charge (e.g. over land, plant or equipment), to pay out the money collected:
first, to pay the secured creditor, and
second, if there are any funds left over, to pay this surplus to the company or its other external administrator if one has been appointed
if they have been appointed under a floating charge (e.g. over cash, debtors or stock), to pay out the money collected:
first, to pay priority claims (including certain employee entitlements)
second, to pay the secured creditor, and
third, if there are any funds left over, to pay the company or its other external administrator if one has been appointed, and
to report to ASIC any possible offences or other irregular matters.
How does receivership affect me?
The receiver’s primary duty is to the company’s secured creditor. The main duty owed to unsecured creditors and shareholders is an obligation to take reasonable care to sell charged property for not less than its market value or, if there is no market value, the best price reasonably obtainable. A receiver also has the same general duties as a company director.
There is no obligation for the receiver to report to the shareholders on the progress or outcome of the receivership.
What information will I receive in a receivership?
The statutory financial reporting obligations of listed and very large companies remain while it is in receivership, as do the requirements for public companies to hold annual general meetings.
However, ASIC has given relief so that a company with a receiver appointed to the whole or substantially the whole of its property may defer meeting its financial reporting obligations for six months after the receiver’s appointment.
The receiver must lodge a detailed list of their receipts and payments for the receivership with ASIC every six months. A copy of these statements of receipts and payments may be obtained from any ASIC Business Centre, on payment of the relevant fee.