Administrative Receivership (often confused with Administration) is a formal insolvency process whereby a floating charge holder (e.g. a bank) appoints a Receiver to take control of a business and realise its assets solely on behalf of the floating charge holder. Unlike an Administrator they are not looking to rescue the company with a view to it continuing as a going concern.
Receivership has become less common as secured creditors are now unable to appoint a receiver unless their security was created prior to 15 September 2003.
However it is still an option that can be utilised if the security predates this.
The lead up to receivership usually involves prolonged dialogue with the bank. In this regard a review period around a business plan to improve the trading position will normally have occurred, possible overseen by an insolvency practitioner appointed to act on the banks behalf.
This will be focused around the viability and stability of the business and whether the banks’ exposure would be sufficiently covered in the event of a failure.
What can you do if faced with Receivership?
The possibility of avoiding receivership largely depends on how advanced the process has become and what positive actions have been introduced, since it became apparent that the business was insolvent and the terms of the secured debenture have been breached.
There may be the option to implement a company voluntary arrangement (CVA) or negotiate informally on your behalf with the bank to prevent or prolong a receivership appointment. In order to establish which options are available it is important to take independent professional advice as soon as possible.
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