A company may be placed under receivership, if a receiver is appointed to enforce a charge for the benefit of holders of debentures of the company. Receivership is initiated by a holder of a floating charge, usually a bank.
Who is a receiver?
A receiver is a person who is appointed to collect, protect and receive property and income from property. A receiver may be appointed in respect of a company encompassing its entire business and undertaking, or in respect of a particular asset or assets of the company.
The Court however, may appoint the liquidator as a receiver on behalf of the debenture holders or other of the Company’s creditors if the Company is being wound up by the Court.
Receiver is NOT THE SAME as the official receiver
A receiver shall not be qualified to be appointed and act as receiver of a company—
An undischarged bankrupt;
A mortgagee of any property of the company, auditor, secretary or employee of the company or of any corporation; or
Any person who is neither an approved liquidator nor the Official Receiver cannot be an appointed receiver.
Please refer to section 20 of the Insolvency Order, 2016.