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Information About Receivership

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.

Reasons Why A Business is Put 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:

  • To avoid liquidation and bankruptcy. A business that forecloses will often entail foreclosure liability. To keep this from happening, most businesses would rather have a court-appointed receiver.
  • For property protection. Once a business is put under receivership, they typically receive property protection. Under control of the chosen receiver, the company’s assets may be preserved.
  • To bring a new management approach. A new receiver will generally provide a management approach or a new perspective on how to handle things within the company.
  • To increase their asset worth. Since a receivership will allow the business anywhere from three to six months before reaching a trust deed sale, the court receiver may be able to use this period in order to grow the value of the said property.
  • To evade lender liability. A lender who takes legal possession of a company’s property will most likely receive lower offers and sales compared to one sold by a receiver. If the former happens, the business will still have to pay any remaining balance they may owe that was not covered by the sale of their properties.

Powers Commonly Granted to Receivers

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.

More About Receivership

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.

For more information on receivership services, contact us at 877.520.1280 or email us at