Receivership (Receivers & Managers Appointed)
Receivership is a crucial legal process employed primarily by secured creditors to protect their interests when a company faces financial distress. This process involves the appointment of a receiver manager who takes control of the company’s assets, operations, and finances to realize the value of secured assets. Receivership is governed by Singapore laws, including the Insolvency, Restructuring, and Dissolution Act 2018 (IRDA 2018).
Key Aspects:
Receiver Managers are typically appointed by secured creditors who hold a charge or security interest over specific assets of the company. Court orders may also facilitate the appointment of a receiver manager in certain situations.
The receiver manager’s primary duties include:
- Realizing Asset Value:
Evaluating, managing, and selling secured assets to generate funds for the secured creditor.
- Secured Creditor Protection:
Ensuring that the secured creditor’s interests are safeguarded, and the proceeds from asset sales are used to repay the secured debt.
- Business Operation Management:
In some cases, the receiver may continue to operate the business to preserve its value while seeking a suitable buyer.
Two primary types of receiver managers exist:
- Fixed Charge Receiver Manager:
Appointed to manage and realize the value of specific assets subject to a fixed charge. Proceeds from these assets are used to repay the secured debt.
- Floating Charge Receiver Manager:
Appointed when assets are subject to a floating charge, often over the entire business. They may manage the entire business until it is sold as a going concern.
Unsecured creditors and other stakeholders’ rights are not automatically extinguished during receivership. Secured creditors receive priority in receiving proceeds from asset sales.
Receivership typically concludes when the secured debt is fully repaid, and any remaining assets or proceeds are returned to the company or its stakeholders.
Receivership adheres to legal provisions in Singapore, notably the IRDA 2018. These laws define the rights, duties, and powers of receiver manager.
During receivership, the powers of the company’s directors and management are often suspended, with the receiver manager assuming control of decision-making.
Receivership can pose legal, financial, and operational challenges. The receiver manager must act diligently to maximize asset value for the secured creditor.
When a viable business is at hand, the receiver manager may aim to sustain operations and sell it as a going concern to maximize returns for the secured creditor.
Receivership plays a pivotal role in Singapore’s corporate insolvency landscape, ensuring secured creditors’ interests are upheld while efficiently realizing and distributing asset value based on legal priorities. Compliance with established legal frameworks is essential for all stakeholders to achieve the best possible outcome.
To understand more about Receivership (Receivers and Managers Appointed), look at our Frequently Asked Questions (FAQs). Need help from a Singapore insolvency practitioner? Contact Us.