Refinancing out of a Receivership:

If a receiver has been appointed over your company to manage its affairs and collect and sell sufficient assets to repay the debt owed to the secured creditor there may be a range of avenues available to you. A Bankruptcy and Insolvency Lawyer and an insolvency practitioner can conduct a solvency review of your company and outline available options. You need to be aware of your options so that you can make informed decisions about your company’s future. Options may include refinancing, restructuring or changing your company’s activities, or appointing an external administrator. Having accurate legal and financial advice from a team of skilled Bankruptcy and Insolvency professionals may be beneficial in this regard.  

If you suspect your company is in financial difficulty, seek correct accounting and legal advice as early as possible, as this increases the likelihood of the company surviving. One of the most common reasons for the inability to save a company in financial distress is that professional advice was sought too late. The following factors may indicate a risk of insolvency: ongoing losses; poor cash flow; absence of a business plan; incomplete financial records or disorganised internal accounting procedures; lack of cash-flow forecasts and other budgets; increasing debt (liabilities greater than assets); problems selling stock or collecting debts and solicitors’ letters, demands, summonses, judgements or warrants issued against your company. Having proper legal and financial advice from an experienced Bankruptcy and Insolvency professionals may greatly assist in informing and guiding you through a refinance.

By refinancing you may be able to steer your company out of a receivership. You need to locate a new financier that is willing to assume the debt obligations of the initial secured creditor who appointed the receiver. This financier will need to release the first secured creditor by effectively ‘paying out’ the debt obligation your company owes them, along with any interest or penalty that is applicable. In addition, it may be necessary to enter a Deed of Release and Settlement to release any litigation or recovery actions that may have been commenced by the secured creditor. This document will establish that any liabilities owed by your company to the secured creditor are released and that the secured creditor is later barred from initiating or pursuing any claim, damages or suit against you for the initial default under the security agreement. Refinancing allows your company to restructure your debt and recapitalise the company. This allows a speedy resolution of a debt dispute that could easily escalate in costs and liabilities that your incur as a manager or director of your company. Comprehensive and sound advice from a Bankruptcy and Insolvency Lawyer regarding Receiverships can be greatly beneficial in this regard.

If you do not act to resolve the debt owed to the receiver your company may be placed in administration or receivership and each has different consequences. Should the company enter into external administration you would lose control of the company to an administrator who will control and manage the company in accordance with a Deed of Company Arrangement (DOCA). If a secured creditor holds a substantial interest in your company, they may align their interest with the administrator and vote accordingly, prejudicing other creditors and the interest of the company as a whole. If the company enters receivership then the powers of the directors depend on the powers of the receiver, as detailed in the charge document, and the extent of the assets over which the receiver is appointed. If the receiver is appointed over all or most of the assets of a company, the receiver effectively has control, although the directors still have certain responsibilities and duties, and may retain residual control. Proper legal advice by a Bankruptcy and Insolvency Lawyer may be advantageous if you are acting in this capacity or are dealing with financing in a Receiverships.

If you would like further information or wish to discuss your Receivership 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. 

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.