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—
- A corporation;
- 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.