Corporate Insolvency Options – Part 4: Receivership

Corporate Insolvency Options – Part 4: Receivership

This is the fourth of a four part series of articles considering various corporate insolvency and restructuring options.

Part 1: Liquidation – of which there are three types – Members Voluntary Liquidation, Creditors Voluntary Liquidation and Compulsory Liquidation
Part 2: Schemes of Arrangement and Compromises
Part 3: Examinership
Part 4: Receivership


It is a reality that payment holidays or such similar moratoriums cannot continue indefinitely. Accordingly, the number of banks and vulture funds moving to appoint receivers in the not too distant future is likely to drastically increase.

What is receivership?

Receivership is a means through which a secured creditor can recover value through the realisation of secured assets.

How are receivers appointed?

Two ways:-

• as provided for under power contained in an instrument such as a mortgage or debenture; or
• by court order.

Powers of receivers

Receivers have far reaching powers to do all things necessary in connection with or incidental to the attainment of the objectives for which the receiver was appointed. In addition, the receiver has the following powers (provided these are not limited in any way by the court order appointing the receiver or the instrument under which the power is granted to appoint the receiver):-

• to enter into possession and take control of property;
• lease, let, hire, dispose or property;
• grant options over property on such conditions as receiver sees fit;
• borrow money on the security of the property;
• insure property;
• repair, renew, enlarge property;
• convert property into money;
• carry on any business;
• take on leas or on hire or acquire any property necessary to carry on the business;
• execute any document;
• bring or defend any proceedings;
• do any act or thing in the name of or on behalf of the company;
• draw, accept, make and endorse a bill of exchange or promissory note;
• use the company seal;
• engage/discharge employees;
• engage a solicitor or accountant;
• appoint any agent to do any business that the receiver is unable to or that it would be unreasonable to expect the receiver to do;
• prove debt or liability in a bankruptcy, insolvency or winding up, receive dividends and asset to a proposal for a composition or a scheme of arrangement;
• call for the payment of money unpaid on shares and to make a call in the liquidator’s name for such (provided proper indemnities are given);
• enforce payment of any call that is due and unpaid;
• make or defend an application for winding up;
• refer to arbitration or mediation any question affecting the company.

Receivers generally are appointed over property.  However, they can arise in various other scenarios as well such as in trading businesses.

Most commonly, it is banks that exercise the power to appoint a receiver.

It is therefore critically important to scrutinise the documentation under which the power to appoint is created in order to ensure the receiver is effectively appointed and to ask whether the powers of the receiver once appointed are limited in any way.

Reddy Charlton act for and advise financial institutions, receivers and debtors alike.  For more information, please do not hesitate to contact one of our team.

Corporate restructuring and insolvency options differentiated

This series of articles has sought to broadly set out the various corporate restructuring and insolvency options available.  The following is a summary of the options and when they are used.

Solvent Company:
– Members Voluntary Liquidation
– Receivership

Insolvent Company/Prospect of Survival:
– Receivership
– Examinership
– Scheme of Arrangement or Compromise

Insolvent Company/No prospect of Survival:
– Creditors Voluntary Liquidation
– Compulsory Liquidation

For further information contact Elaine McGrath

Elaine McGrath
Author: Elaine McGrath