Receivership is the process whereby a secured lender in accordance with the rights conferred in a charge or mortgage document realises the assets so charged to repay amounts due. Although historically and virtually exclusively a process used by banks as a means of recovery it is a procedure of last resort in the lender – borrower relationship.

Borrowers faced with financial difficulties which may precipitate the appointment of a receiver should take care to ensure that they receive appropriate financial and legal advice. The nature of the charge held by the lender will determine the rights and duties of any receiver should one be appointed. Prior to any decision to appoint a Receiver a lender and indeed the company concerned should explore every option available to avoid same. Fixed charges give rise to rights of action in respect of specific assets whereas fixed and floating or floating charges may have different degrees of asset cover and will entail additional responsibilities on the part of the Receiver.

Both lenders and borrowers faced with a potential receivership situation are most strongly advised to have an independent and objective assessment of the position carried out. Mazars “quick review” process is an ideal procedure for either party to commission as a basis for deciding the virtue in alternatives that may be open to resolving the situation.

Increasingly the banking sector has been loathe to resort to receivership as a recovery method preferring, when secure in the value and virtue of the change, to either have the realisation carried out in a liquidation or alternatively to prevail upon the company attend to realisation prior to a formal insolvency procedure. We recommend that great care should be exercised by directors acquiescing to complete the latter on behalf of the chargeholder.

When acting as Receiver our approach is to do so expeditiously, efficiently and with a mind to maximising the value in the assets under charge to the benefit of all concerned.

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