Receivership explained


If your company has defaulted on a secured loan then it could be at risk of being put into receivership. Read on – the information below may help you save your company. We explain your business rescue options. As the director, you decide how to proceed. You should not feel pressured into something you don’t fully understand.



What is receivership?


Receivership is a formal insolvency process where the holder of a security interest in the whole, or substantially the whole of the company’s property (such as a bank) appoints a receiver to take control of a company with the aim of recouping the debt owed by selling company assets or via other actions. If your company has defaulted (or is likely to default) on a secured debt, it may be put into receivership. Receivership is often confused with administration. The main difference is that while a receiver takes full control of the company just as an administrator does , they operate with the primary intents of recovering their appointor’s debt, as opposed to in the interest of the creditors. During a receivership, many of your powers as a director cease and you have little control over what happens to your business assets.


Can a VA be initiated?


A Voluntary Administration (VA) can be initiated at any time up until a winding up order is granted against your company. If you’ve already been served a statutory demand, or your creditors are threatening to issue one, you still have time to initiate a Voluntary Administration to attempt to save your business, but you must act quickly. Once the winding up order is granted, compulsory liquidation will commence and the chances of saving your business are low. If your company enters into administration, you can propose a Deed of Company Arrangement (DOCA) to the creditors to enable the business to continue as a going concern.


What is the cost of a VA?


When initiating a VA, your main expense is the cost of an independent insolvency practitioner to take control of the business, investigate it’s affairs and assist you to formulate and present the proposal to creditors. This fee will vary depending on the amount of work involved and the particulars of your case. Creditors must approve an Administrators fees which are paid out of the Company’s Assets or, where insufficient, from contributions from directors and/or stakeholders.


Financial Distress Solutions offer highly competitive rates, and we’ve helped countless businesses use the VA process to avoid liquidation and achieve a better outcome for stakeholders in the circumstances. Contact us for a free consultation and an assessment of the cost for your company. Our registered insolvency practitioners have extensive experience acting as Voluntary Administrators. For a free consultation send us an email or call 1300 747 577.