Receivership
Understand your position before you act. A secured creditor has moved, or is about to. The receiver acts for the creditor who appointed them, not for the company or you, so the most useful thing you can do now is get an independent assessment of where you actually stand.
What receivership actually is
When a company goes into receivership, a secured creditor, or, less commonly, the court, appoints a receiver to take control of and sell some or all of the company's assets to repay the debt owed to that secured creditor.
The receiver is usually a registered liquidator, appointed to take possession of the secured property, sell it, and pay the money collected to the appointing creditor in the order required by law.
The company still legally exists. That is what separates receivership from liquidation, which winds up and dissolves a company, and from voluntary administration, which a director initiates. Receivership is not a choice the company makes. It is a secured creditor enforcing its security.
- Who appoints the receiver
- A secured creditor enforcing its security agreement, or less commonly, the court by court order.
- Do you stay a director?
- Yes. The company continues to exist and you remain in office. What you lose is control of the secured assets.
- Who does the receiver act for
- The appointing creditor. Not the company, not you, and not the unsecured creditors.
- Can the company survive it?
- It can. Once the outstanding debt to the secured lender is repaid, control of the company and any remaining assets can return to the directors.
Receivership is narrower than directors expect
Four things worth knowing before you assume the worst.
The company still exists
Receivership is not liquidation. The company is not wound up or dissolved by it, and the business can survive the process.
You remain in office
You stay a director, and your duties continue. What changes is the control of the secured property the receiver has taken possession of. A receiver does not generally take over the company's affairs.
Assets cannot be dumped
Under section 420A, a receiver must take all reasonable care to sell secured assets for not less than market value, or for the best price reasonably obtainable where there is no market value.
Control can come back
Once the appointing creditor is repaid and the receiver resigns or is discharged, control returns to the directors unless another external administrator has been appointed.
What receivership means for directors, employees and creditors
For directors
You keep your office and lose control of the secured assets.
You must give the receiver a Report on Company Activities and Property (ROCAP) and access to the company's books and records relating to the secured property. [VERIFY] A company receivership does not automatically make you personally bankrupt, but two exposures matter. Personal guarantees given to the secured lender can make you personally liable for the outstanding debt, and insolvent trading is a live risk if a liquidation follows. Get your own advice early.
For employees
A priority class, where there are circulating assets to fund it.
Where a receivership is funded from circulating assets, priority employee entitlements are paid from available funds ahead of the secured creditor, in the order set out in the payments table below. If a receiver and manager keep the business trading, jobs can continue.
For unsecured creditors
Limited rights against the receiver, but not none.
An unsecured creditor has a legal claim against the company but no security over its property. The receiver owes ordinary unsecured creditors only a limited duty and is not required to report to them, though you can still take legal action and can apply to wind the company up. Unfair preferences, uncommercial transactions, insolvent trading and creditor-defeating dispositions are recoveries available to a liquidator and not to a receiver, which is one reason a receivership sometimes runs alongside a liquidation.
How circulating-asset proceeds are paid out
Where a receivership is funded from circulating assets, employee entitlements are a priority class and are paid in this order.
Each category is paid in full before the next is reached, and pro rata within a category if the funds fall short.
| Order | Paid from available funds |
|---|---|
| 1 | The receiver's costs |
| 2 | Outstanding wages and superannuation |
| 3 | Outstanding leave: annual and long service |
| 4 | Retrenchment pay |
| 5 | The secured creditor |
How the receivership process works
From the secured creditor's first move to the day control returns.
- STEP 1
A secured creditor enforces its security interest
A lender holding a security interest, such as a mortgage or a charge on the Personal Property Securities Register (PPSR), can appoint a receiver under the security agreement when the company defaults. The security may cover non-circulating assets, such as plant and equipment, or circulating assets, such as debtors, cash, and stock, which determines how proceeds are paid out.
- STEP 2
Or a receiver appointed by court order
Less commonly, a receiver is appointed by the court. Insolvency is not a prerequisite: a court appointment often follows a shareholder or partnership dispute or is used to preserve assets while a matter is resolved.
- STEP 3
The receiver's role once appointed
Their powers come from the security agreement and the Corporations Act 2001. They take control of the secured property, sell it, pay out the proceeds in the order required by law, report possible offences to ASIC and lodge an annual administration return. Under section 420A, they must take all reasonable care to sell secured assets for not less than market value, or the best price reasonably obtainable where there is none. A receiver and manager can also run the business and sell it as a going concern.
- STEP 4
How the receivership ends
It ends once the receiver has repaid the appointing creditor, met their duties and paid the receivership liabilities. They resign or are discharged, and control of the company and any remaining assets returns to the directors unless another external administrator is appointed.
Receivership, liquidation or voluntary administration
Often used interchangeably, they do very different things.
| Receivership | Liquidation | Voluntary administration | |
|---|---|---|---|
| Who appoints | A secured creditor, or the court | Creditors, members or the court | The company's directors |
| Whose interests does it serve | The appointing secured creditor | All creditors | The company and its creditors |
| Does trading continue? | Only with a receiver and manager | Usually no | Often, while options are assessed |
| What it achieves | Repays the secured creditor's debt | Winds up and dissolves it | Breathing space to find the best outcome |
| Can control return to directors? | Yes, once the secured debt is repaid | No | Yes, or a DOCA or liquidation follows |
A company can be in more than one of these at the same time, for example, in receivership and liquidation concurrently. General information, not personal advice.
Real people, on your side, when it matters most
At Rapsey Griffiths, you'll deal with the people whose name is on the door - Mitch Griffiths and Chad Rapsey, Founders. Between them, Mitch and Chad bring decades of turnaround and corporate-insolvency experience, and a calm, commercial approach that helps directors understand exactly where they stand.
What happens when you get in touch
Three steps, with no obligation at any of them.
A free call with a Registered Liquidator
Tell us what's happening with the company in your own words. We'll ask about the ATO position, secured and unsecured debts, employees, and how much time you have.
We assess solvency and set out the options
We review the company's financial position and explain which corporate insolvency procedures are genuinely available in your context, what each costs, and what each means for you personally.
We act on your position, not the lender's
The receiver acts for the creditor who appointed them. We will not promise to stop the bank - what we will do is explain where you actually stand and act on your position, whether that is a voluntary administration, a restructure, or a negotiated outcome with the lender.
What people ask us first
Straight answers to the questions we hear most.
What is the difference between receivership and liquidation?+
Can you stop a receiver from being appointed?+
What happens to employees in receivership?+
What happens to directors in receivership?+
How long does receivership last, and how does it end?+
Read up before you reach out
Why the hard decisions get delayed
The pattern behind a deferred conversation, and what the delay actually costs.
Indicators of a struggling business
The warning signs that a company is heading for insolvency, and why they are worth acting on early.
The latest ASIC data on turnarounds
External administrations are at a record high. What the numbers say about moving early.
Explore how else we can help
Liquidation
An orderly, properly handled wind-down when a company is no longer viable.
What liquidation involves →Voluntary administration
An administrator takes control and puts the best available outcome for creditors.
What administration involves →Corporate insolvency
Voluntary administration, liquidation and creditor arrangements for companies under pressure.
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