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What Happens to a Company in Receivership?

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Understanding company receivership is a bit confusing at first, but the one thing that is completely understood is that companies going into receivership are in a heap of trouble. The process begins when a creditor with a floating charge is not paid and has had to take action to protect its investment. The creditor, usually a bank, will appoint a receiver to take charge of its assets in order to guarantee repayment of monies due. Companies in receivership are then under the control of the receiver who was appointed by the creditor/bank and the receiver will make every effort to realise assets to repay the creditor in full any monies due along with interest and other administrative fees. This is part of the debenture agreed to by the company when the loan was initiated.

A company in receivership might need to be liquidated in order for the creditor to realise assets due but it may also be turned around and begin making a profit once again under the guidance of the receiver. From the perspective of the company in receivership it could be a good thing, but for the management or directors responsible for its current state of insolvency it could mean their dismissal. It could also end up in the director being investigated by the government as well. Remember, the receiver is charged with investigating the conduct of all involved and is required to submit a formal report to the DBERR. If the director has lost control of the finances within a company, it could be ineptitude but it could also be negligence which may or may not be punishable under the law. For sure the director will lose his/her current position, but may also unable to serve as director again in the future. So then, if looking for a company in receivership definition, it means, in the very broadest sense, a creditor seizing control of the company to realise assets as payment for what is due.

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