Receivership

Company Receivership Advice for Limited Companies

Receivership is when professional manager is put into a company to secure the assets of that company. Creditors petition the court for receivership and a receiver is appointed by the courts. Receivership is a process initiated by banks or other creditors who have lost faith in a company's ability to repay its debts which are registered at companies' house in the form of a "charge" "loan" or other security documentation. Receivers are appointed with a view to selling assets so that creditors can recover money owed to them.

There are different types of receivership such as "Administrative" "LPA" and other types of receiver. It is important to understand the differences.

Different Types of Receiver

There are 2 main types of receiver;

1) The Administrative Receiver

Administrative Receivers are appointed over substantially the whole of the assets of the company and have a wide range of statutory powers. This means that they may well be able to continue to trade the business as a going concern and sell it on maximising the return to the bank. The downside is that they have more onerous duties than other receivers. Administrative Receivers have to be Licensed Insolvency Practitioners.

2) The receiver appointed by a secured creditor holding a fixed charge

Fixed Charge Receivers are appointed over fixed charges and possibly floating charges. They have the powers to take possession and sell charged assets. Fixed Charge Receivers do not have to be Licensed Insolvency Practitioners. Fixed charged Receivers are often referred to as LPA Receivers. LPA means, Law of Property Act 1925. They can be appointed if there has been a default in the lending terms on a property. Default means that; 2 months of interest has been unpaid, 3 months of the principle amount is unpaid or there has been another substantial breach.

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