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Receivership is the process in which a secured creditor who holds security over some or all of the company’s assets appoints a receiver to manage the company’s affairs. The receiver’s primary role is to collect and sell sufficient of the company’s charged assets to repay the debt owed to the secured creditor. A receiver is a person appointed by a court in the exercise of inherent or statutory jurisdiction; or by any person under a power conferred by statute or contract, to take possession of property and to deal with it as directed. A receiver is a person appointed to take control of a company's undertaking, or part of its property, for enforcement of a creditor's security or to prevent improper disposal of the company's property. Having proper legal and financial advice from a team of skilled Bankruptcy and Insolvency professionals may be of great utility in this aspect.

Generally a receiver derives their power from a security document such as a charge, mortgage or loan document. This security document sets out the rights, powers and responsibilities of the receiver as regards the grantor of the security. Therefore security document is the formal bargain between the grantor and the secured party. The primary duty of the receiver is to the secured party the under the instrument under which the receiver has been appointed. At times, the security document confers very broad powers on the receiver and a broad range of liabilities and obligations on the part of the grantor for the benefit of the secured party. Comprehensive and sound advice from a Bankruptcy and Insolvency Lawyer throughout this complex and procedural process can be of significant value.

A secured creditor does not have to appoint a receiver. A secured party entitled under the terms of the security agreement to take control of a company's undertaking or to sell certain of its assets can do so personally or by agent. But a secured party taking possession of a company's business personally or by agent is strictly accountable not only for actual receipts of income and other money but also amounts that might have been received disregarding fault of the secured party. Secured creditors can avoid potential liability by ensuring that the security agreement provides that the secured party can appoint a receiver who is to act as agent of the grantor-company. In this manner the secured creditor ensures that they have protected their interest yet also avoid any liability from dealing with company assets directly.

In addition there may be situations where the Court will appoint a receiver. The circumstances, other than enforcement of a security, in which a receiver can be appointed include an internal dispute in a company where a receiver is appointed by a court to control the company's property pending the outcome of the dispute. Another example is an appointment by the Court, an investigation is underway and it is necessary to freeze the assets of companies and others where fraud is suspected. In such a case the appointment may be made in aid of a Mareva injunction. Yet another example is on the application of a creditor of a company, to make such order as it thinks necessary to protect the creditor's interests while the company is under administration. Thus, professional legal advice by a Bankruptcy and Insolvency Lawyer may be beneficial if you are involved in a receivership.

If you would like further information or wish to discuss your liquidation matter with an experienced Bankruptcy and Insolvency Lawyer please do not hesitate to contact us by telephone on (02) 9233 4048 or by email to info@navado.com.au

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This webpage (and any material or wording appearing on this webpage) is provided for general information purposes only and does not constitute any Legal Advice. It does not take into account your objectives, your instructions or all of the relevant facts and/or circumstances. Navado accepts no responsibility to any person who relies on the information provided on this website. We further refer you to our Disclaimer.

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