Receivership is a legal process where a receiver is appointed to take control of one or more assets, either to manage them while a dispute is ongoing, or to realise them to repay creditors.
What types of receivership are there?
There are four main types.
Fixed charge receivership (LPA receivership)
Appointed by a lender holding a fixed charge over a specific asset such as property. The appointment is made under the terms of the charge itself, which usually sets out the receiver’s powers. The Law of Property Act 1925 supplies the default powers, and governs the appointment where the charge does not confer them. The receiver takes control of and manages the asset with a view to selling it and repaying the lender.
Court-appointed receivership
Usually made on the request of a creditor, shareholder or other interested party in cases where there is a dispute or a risk of asset loss. The receiver’s role is to preserve or protect assets, often in cases involving fraud, mismanagement or shareholder disputes.
Receiver and manager
Appointed by a creditor holding security, with broader powers than a standard receiver. A receiver and manager can not only collect and realise assets but also manage the business itself, to try to improve its financial position.
Administrative receivership
Appointment by a secured creditor (usually a bank) holding a specific type of security such as a floating charge over most of the company’s assets. The receiver manages and sells the assets to repay the secured creditor, in a manner similar to administration. This type is much less common today and is only available for certain charges created before 2003.
How does it help?
A receiver can help manage a company in deadlock, or realise an asset, without having a wider effect on the company’s affairs. For lenders, it is often the most proportionate way to protect a position.
Working with our property specialists
Receiverships frequently turn on property. Along with our network of property consultants, we make sure valuation, asset management and disposal strategy are considered properly from the outset rather than bolted on later. See our property solutions.