Receiver

Definition of Receiver

A receiver is a person or entity appointed by a court or a creditor to oversee, manage, and protect a debtor’s assets or business operations, especially during financial distress or bankruptcy. The receiver’s role is to collect and preserve the debtor’s assets, manage operations to preserve value, and distribute assets according to legal or contractual obligations.

Types of Receivers

1. Official Receiver: In bankruptcy, this government-appointed official manages the bankrupt’s estate, overseeing the liquidation and distribution of assets.
2. Administrative Receiver: Appointed when a floating charge over a company’s assets crystallizes, granting wide powers to manage and potentially liquidate the company’s assets.
3. Fixed Charge Receiver: Specifically deals with the property covered by a fixed charge and lacks authority to manage the company’s entire business operations.

Examples

1. Bankruptcy Case: In the event of a company’s bankruptcy, an official receiver may be appointed to manage the liquidation of the company’s assets and settle debts with creditors.
2. Crystallization of Floating Charge: When a floating charge (pre-dating 16 September 2003) over a company’s assets crystallizes, an administrative receiver can be appointed to assume control over the entire business, manage operations, and potentially sell assets.
3. Fixed Charge Property: If a company defaults on a loan secured by a fixed charge on real estate, a fixed charge receiver might be appointed to sell the property and repay the secured debt.

Frequently Asked Questions (FAQs)

What is the difference between an administrative receiver and a fixed charge receiver?

An administrative receiver can manage the entire business and its assets, while a fixed charge receiver can only deal with the specific assets covered under the fixed charge and has no authority over the overall business operations.

What are the primary responsibilities of a receiver?

A receiver’s main duties include collecting and protecting assets, managing business operations if necessary, selling assets to repay debts, and distributing any remaining assets according to legal priorities.

When is a receiver appointed?

A receiver is typically appointed during financial distress, such as insolvency or bankruptcy, or if a borrower defaults on a debt secured by a charge over their assets.

Can a receiver sell the company’s business?

Yes, an administrative receiver has the power to sell the company’s business as a going concern or liquidate assets individually to repay creditors.

Related Terms with Definitions

• Receivership: The legal process in which a receiver is appointed to manage a company’s assets and operations.
• Bankruptcy: A legal status for a person or entity that cannot repay debts to creditors.
• Official Receiver: A government appointee who manages the estate of a bankrupt individual or entity.
• Floating Charge: A security interest over a fund of changing assets of a company.
• Administrative Receiver: A receiver appointed over all or substantially all of a company’s assets.
• Fixed Charge: A security interest over specific assets of a company.
• Liquidation: The process of winding up a company’s financial affairs and selling off assets to repay creditors.

Online References

1. Investopedia - Receiver
2. The Balance - Role and Duties of a Receiver
3. Gov.uk - Liquidation and Insolvency

Suggested Books for Further Studies

1. “Corporate Bankruptcy: Economic and Legal Perspectives” by Jagdeep S. Bhandari, Lawrence A. Weiss
2. “Insolvency Law: Corporate and Personal” by David Brown
3. “The Law of Corporate Insolvency” by David Milman

Accounting Basics: “Receiver” Fundamentals Quiz

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