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Liquidating Assets under Receivership

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Many business owners have very good intentions of paying their creditors, but for one reason or another are unable to keep their contractual agreements to satisfy those debts. More often than not it is the small business owner who gets confused as to the meaning of receivership vs. liquidation and if there is any difference at all. Actually, the difference is great if you look at what each of them means. However, the end result is the same in that both result in the sale of assets. Receivership is where a creditor will actually take control of your company and its assets in order to liquidate them to realise money to cover the debt owed. Liquidation is the process of selling those assets. Again, receivership is taking over the assets and liquidation is the sale of those assets. That's the simplest way to understand the difference.

Under receivership liquidation is not always necessary, however. Because the creditor also takes over the day to day administration of the company, it may not be necessary to liquidate any assets whatsoever! Perhaps the company was doing poorly due to incompetent management. In that case, the receiver might just reorganise the business into a new model without selling a single asset. He/she will then use the profits to pay the creditor. When paid in full, the business can be returned to the owners. Receivership and liquidation often go hand in hand but they don't mean the same thing at all. It is possible to liquidate a business without it going into receivership and it is also possible to go into receivership without liquidating assets. Often they work in tandem, but not always. If you are in danger of being placed in administrative receivership by a creditor, talk to a licensed Insolvency Practitioner as soon as possible. He or she may be able to negotiate a voluntary arrangement for you before you are forced into receivership and liquidation.

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