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receivership

picture of skyscraperThis occurs when a lender is concerned about repayment of their debt so they appoint an Insolvency Practitioner to recover the amounts owed.

This is a  process in declining use since there are limited circumstances in which an Administrative Receiver can be appointed.  It is more common for Administrators to be appointed.

The process

The lender will normally serve notice on the company that it requires immediate repayment of the debt owed.

If no repayment is made the lender may sign a document to appoint Administrative Receivers.

The Administrative Receivers will then look to get as much money for the lender.  This is usually achieved through a sale of the business as a going concern but it could be that the business is closed and assets sold off.

Other creditors

The Administrative Receiver is effectively working for the bank but does have some obligations to other creditors.  Sometimes there may be sufficient assets to pay off the bank and leave some money for other creditors.  In this scenario to pay non-preferential creditors (i.e. not employee preferential claims) the company would be placed into liquidation.







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