RECEIVERSHIP

Not to be confused with an Administration, in the case of Receivership, a Receiver is appointed by a floating charge holder, normally a bank.

Typically a company finds itself with serious cash flow problems having borrowed against a business plan that has not worked. The companies overdraft is constantly at its limit as monies owed are slow to come in and cheques are highly likely to be constantly bounced by the bank. The bank will call for a ceiling on borrowing and take this as a sign that the company is out of control. The bank is likely to act on some or all of the following:

• Seek a reduction in its exposure.
• Request increased security, normally in the form of personal guarantees
• The bank may request new capital be introduced
• Request a new business plan
• May ask for investigating accountants to look at the business
• Seek the appointment of a Receiver

The Receiver will ascertain what the future prospects of the company are and decide whether to sell some or all of the assets, the business as a whole or continue to trade whilst a better deal can be found.

During the Receivership process, the Receiver will investigate the conduct of the directors and file a report with the Department of Trade and Industry.

The company is rarely saved in its existing format, often jobs are lost and directors will lose their own employment and any monies owing to them. It is unlikely that the company's unsecured creditors will receive any money back. Clearly the cost is extremely high

To discuss Receiverships call Philip Wood on 01782 713700.