If a company that owes you money goes into receivership or liquidation, you need to know how this may affect you. Some key differences between receivership and liquidation will impact creditors. This article examines what happens when a company can no longer pay its debts when they are due and what it means for you as a creditor.<\/p>\n\n\n\n
If you have a binding contract<\/a> with a company, that contract contains provisions allowing you to take security over the company\u2019s assets. Likewise, you will be a secured creditor or lender if they fail to pay you under the agreed terms.<\/p>\n\n\n\n Receivership allows a secured creditor to recover the debt owing to it by appointing a suitably qualified and independent \u2018receiver.\u2019 This receiver will collect and sell the secured asset that is the subject of the security and receive an amount from its sale. This is known as realising an asset. Alternatively, a court may appoint a receiver, which will become public via a notice.<\/p>\n\n\n\n After a receiver realises the assets, the proceeds will first go to the receiver to recover their costs and fees. It will then go to priority claims (known as preferential creditors), such as:<\/p>\n\n <\/ul>\n \n Any leftover assets will then go to repay the secured creditor.<\/p>\n<\/div>\n\n\n\n For example, a company provides a loan of equipment or machinery to another company (supplier). Here, they might secure their interests with a charge over the renting company\u2019s interests. Suppose the company giving the security by renting the equipment fails to keep up with repayments. In that case, the supplier can appoint a receiver to sell the secured asset to repay its debt. <\/p>\n\n\n\n If you are a secured creditor, you may be able to resolve your outstanding debt without going to court. You can negotiate a repayment schedule where the company repays you in instalments. Alternatively, you can request the appointment of a receiver. More than one receiver can be appointed at any one time.<\/p>\n\n\n\n If you are an employee of a company that goes into receivership, you will be a preferential creditor and have a priority claim. The receiver will pay out any priority claims before paying a secured creditor.<\/p>\n\n\n\n If you are not a secured creditor or a preferential creditor, it is unlikely that you will receive any payments from a receiver. However, if a company survives receivership and continues to operate, you may be able to recover your debt.<\/p>\n\n\n\n A company will go into liquidation<\/a> when it is unable to pay its debts (compulsory liquidation) or if the shareholders no longer wish to continue trading (voluntary liquidation). A liquidator will be appointed either by:<\/p>\n\n\n\n Similar to receivership, the appointment of a liquidator will become public. A liquidator will investigate the company\u2019s financial affairs and establish why it cannot pay its debts. After this, it will freeze and take control of the company\u2019s unsecured assets and sell these to pay unpaid debts to creditors. Anything remaining will go to shareholders.<\/p>\n\n\n\n Unlike receivership<\/a>, as a creditor, you will have limited control over the liquidation process. Once a liquidator is appointed, the company must cease trading<\/a>. Depending on the amount of proceeds from the sale of assets compared to how much the company owes its creditors, you may only recover some or none of your debt.<\/p>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n<\/p>\n
What Does Receivership Mean for Me?<\/h3>\n\n\n\n
What is Liquidation?<\/h2>\n\n\n\n
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What Does Liquidation Mean For Me?<\/h3>\n\n\n\n