A receiver is someone appointed by a secured creditor who is appointed to take charge of a company’s assets from the
company’s existing management with the goal being to enforce its security to recover the debt due to the secured creditor.
As such it is not necessarily a choice that the directors or shareholders of a company can make in isolation, whilst the directors may
ask a secured creditor to appoint a receiver, the secured creditor can act on their own initiative.
The secured creditor can only appoint a receiver in respect to the specific assets it has security over and it may
well possible for the company to continue to trade however it could from a practical sense be the end of the line,
particularly if the security interest extents to all present and after-acquired property.
The effect of receivership on other creditors of the debtor company is nil, creditors can still attempt
to obtain payment for debts due, enforce a judgment or seek liquidation.
For companies that have secured debt and the lender has the contractual right to appoint a receiver then it is imperative
that directors of companies facing financial difficulties act early and before a repayment default occurs.
Putting together a suitable proposal to address the financial difficulties early in the process is more likely to
prevent receivership compared to letting events take their course.