A receivership is a type of insolvency proceeding that provides a creditor, holding a registered security interest over particular assets, to appoint a receiver (or receiver and manager) to take control of those assets, realise those assets or to protect the rights of the creditor entitled to those assets. Where a business is involved, ypically, a receiver and manager usually trade the business with a view to selling it and maximising the return to the secured creditor.
Details of the creditor’s security interest are registered on the Personal Properties Security Register (PPSR).
The procedure exists to protect the interests of the secured creditor. A receiver (receiver and manager) is appointed when the assets are under threat, particularly because of the risk of insolvency.
A receiver will administer the property subject to the registered security instrument and if empowered will also manage the business/assets. The receivership will continue until the purpose of the receivership is fulfilled; often when the assets subject to the registered general security interest have been realised and the secured party has been paid in full or as far as possible.
The method of appointment is dependent on the general law and the terms of the instrument appointing the receiver.
If an event of default has occurred, there may be a requirement under the registered security instrument that the secured party issue a notice of default before an appointment can be made. If there is a requirement, the demand must provide the debtor a reasonable period in which to pay the sum demanded.
A receivership is appropriate in the following circumstances:
The effects of receivership can be as follows:
The primary role of the receiver (receiver and manager) is to preserve and realise the assets for a secured creditor usually when those assets are under threat and are due to the insolvency of the company or as a result of a dispute.
The receiver’s powers, duties and obligations are determined by the registered security instrument and the Corporations Act.
The receiver and manager must take all reasonable care in exercising a power of sale. The receiver must ensure that all care is taken to sell the assets for market value or the best price that is reasonably attainable.
The first priority is to repay the secured party. This is achieved from non-circulating assets. The costs of the receivership and employee entitlements are afforded priority of repayment from circulating assets, with any surplus being repaid to the secured party. Any surplus funds from circulating and non-circulating assets, after full repayment of the secured party is returned to the company.
A receivership ends when the receiver has collected and sold all assets to make a repayment to the secured creditor, pursuant to their registered security interest, and has completed all their receivership duties. A receiver resigns or is discharged by the secured creditor, and unless an external administrator has been appointed, full control of the company and any remaining assets goes back to the directors.
A Strategic Financial and Operational Review (SFOR) can take a number of different forms, whether it is a pre-lending review, debt restructuring assignment or investigating accountant’s report.
We take a consistent approach to each SFOR, combining technical expertise, relevant industry intelligence and business acumen from across our service lines to efficiently and effectively deliver a high quality SFOR in line with an agreed scope and cost estimates.
Our SFOR team members take time to understand exactly what information your client requires. We seek to fully understand the key drivers of your client.
We will agree a scope, conduct our SFOR, report on our findings, make recommendations for improvement and monitor actual results.
Our SFOR will deliver results.
Our sophisticated three-way financial model allows a business of any size access to accurate financial modelling to help identify financial issues. We have the expertise to then develop a plan for improvement.
Our financial model
A mortgagee in possession (MIP) may be appointed when the secured creditor takes possession of real estate (property) or other assets subject to the security instrument following a default in relation to the loan agreement.
The MIP may appoint an agent to act on its behalf.
The role of the agent is to:
This type of appointment is appropriate when:
There are two key advantages to this type of appointment, outlined below:
An appointment is initiated when:
The net proceeds from the sale of the property or assets will be applied in reduction of the applicable loan account and/or mortgage facility. Any surplus would be available for the owner of the property or assets.