Receivership is a legal process in which a court or creditor appoints a receiver to take control of a company’s assets, operations, or property in order to recover debts owed – typically when the company is in financial distress.
In Simple Terms:
It’s like hiring a caretaker to step in, take over, and sell or manage the assets to pay off lenders – because the business can’t manage its own affairs anymore.
Key Features of Receivership:
| Feature | Explanation |
|---|---|
| Receiver Appointed | Usually by a secured creditor (like a bank), or the court. |
| Control Removed from Directors | The directors lose control of the company’s assets under receivership. |
| Purpose | To repay debts by managing or selling company assets. |
| Applies to | Both companies and individuals with secured debts. |
| Not Always Total Shutdown | Sometimes only specific assets or business divisions are placed into receivership. |
Types of Receivership:
- Administrative Receivership – Appointed by a floating charge holder (usually a bank) under a debenture.
- Fixed Charge Receivership – Often applies to property (e.g. receivership of a commercial building or land).
Receivership vs. Administration vs. Liquidation
| Process | Goal | Who’s in Charge | Result |
|---|---|---|---|
| Receivership | Recover secured debts | Receiver (appointed by lender or court) | Asset control handed over |
| Administration | Rescue or orderly closure | Administrator (insolvency practitioner) | Try to save the company or sell it |
| Liquidation | Wind down & close | Liquidator | Company shut down, assets sold |
Why It Matters:
If you’re involved in insolvency work, receivership may be the first legal intervention in a distressed company, particularly if there’s a mortgage, debenture, or secured lending agreement.
Are Receivership and Administration the Same?
Receivership in the UK and Administration in the UK are distinct processes with different powers and goals. In the US, however, the term receivership does overlap in meaning somewhat with UK administration, but the match isn’t perfect.
Here’s a simple comparison:
UK:
Administration
- Goal: Rescue the company or achieve a better outcome for creditors than liquidation.
- Run by: A licensed insolvency Practitioner (Administrator).
- Directors lose control.
- Offers a moratorium (legal pause on creditor action).
- Can lead to sale, restructuring, or shutdown.
Receivership
- Goal: Recover money for one secured creditor.
- Run by: A Receiver (appointed by a lender).
- Only applies to assets secured under a charge (e.g. a loan on property).
- No moratorium, and no obligation to save the business.
- Largely obsolete now due to law changes (since the Enterprise Act 2002).
United States:
Receivership
- Broader and more flexible term.
- Used for:
- Insolvent businesses
- Distressed assets (like shopping centres)
- Regulatory seizures (e.g. FDIC for failed banks)
- Court-appointed receiver takes control, similar to an administrator.
- Often replaces or suspends directors.
- Goal can be reorganisation, asset management, or wind-down.
Chapter 11 Bankruptcy
- Closer to UK Administration.
- Court supervised.
- Company can continue trading under protection from creditors.
- Designed for reorganisation and recovery.
Conclusion:
Receivership (US) Administration (UK) in effect and tone, but… Chapter 11 (US) is a more precise equivalent to Administration (UK) in terms of legal framework and restructuring goals.
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