Receivership is a state in which a business is designated as someone else’s responsibility. This invariably includes the assets and properties owned by said business. Most commonly receivership is done as a last resort for business entities that have failed to meet their obligations based on industry regulations and financial laws, or have otherwise failed or are on the brink of failing financially.
Receivers can be appointed privately, ordered by the government, or by the court system, and their duties include securing, and managing the assets and the affairs of the business that has been placed under receivership.
There are various reasons why the best recourse for an ailing business is to be put under a receivership. More often than not, it is the only solution that allows a business to get rid of financial troubles. The following are some of the most common reasons why businesses decide to opt for receivership:
As a receiver, one of the core duties is to manage the business properties assets either by collecting or selling them so that the proceeds may be used to pay off any business debts. However, the main duty is still geared towards the benefit of the creditor. Although most receivers are not necessitated to make a report to the creditor, they will typically notify any suppliers or partners involved of their appointment.
Additionally, receivers will report any irregularities or offenses they come across in the course of their receivership, as ordered or required by law.
Receivership is not likely to affect a company’s legal existence and any directors or board members will probably still be able to keep their positions. Nonetheless, any powers that they hold over the company will still be subjected to the appointed receiver’s power. In other words, the control of the business properties may rest solely on the receiver’s hands.