When the debt of a secured creditor is in default they may opt to exercise their security and appoint someone to take control of the asset/s and realise same – these appointments are known as Secured Appointments.
The role of both a Receiver & Manager and a Controller falls under the Corporations Act, 2001 and involves the appointment of a financier/individual to take over assets of a company – generally this is to obtain a return for an unpaid secured creditor. A Controller is usually appointed over a particular secured asset (eg., motor vehicle, equipment lease, etc) and is often the bank themselves, whereas, a Receiver & Manager is appointed over the entire assets of a company – a Receiver can also be appointed by the Controller as their agent.
Note – a Receiver & Manager must be a registered liquidator, ie., a person registered by the Australian Securities and Investment Commission (ASIC) and under Section 1282(2) of the Corporations Act.
Frequently Asked Questions About Receiverships
Who appoints a Receiver?
A secured creditor will appoint a Receiver to a company when the payments due from the debtor are in default – the creditor has the right to do this under their security and use this method to assist in getting their money back.
Who can act as a Receiver?
A Receiver appointed by a secured creditor must be a registered liquidator, registered by the Australian Securities and Investment Commission, and a Court Appointed Receiver must be an official liquidator and registered through the Supreme Court.
What can a Receiver do?
* Collect and realise the assets that are covered under the security and the appointment;
* Pay any employee entitlements that have priority under the Corporations Act, if applicable; and
* Pay monies across to the secured creditor
* Reports to the secured creditor that appointed them
What must the Director do?
When a Receiver is appointed to a company the director is obligated to:
* Complete a Report as to Affairs (RATA) and supply this to the Receiver
* Collate all books and records, relevant to the secured creditors position, and hand these over to the Receiver
* Be available to respond to any question and/or queries of the Receiver – as and when required
Who pays the Receiver/Controller?
The secured creditor pays these fees – however, the security documentation will usually allow the secured creditor to recover any costs incurred from the assets under the charge.
What happens to the Creditors?
The Receiver/Controller will not usually contact the creditors as they represents the secured creditor.
How is the company affected?
The Receiver is appointed to control the asset/s that a secure creditor has a charge over – this means that:
* Directors remain in place and can continue to operate any assets that are not subject to the control of the Receiver
* Directors retain their obligations under the Corporations Act
* Other creditors are not affected by the Receivership – however, they may still apply to Court for an application to wind up the company (in some circumstances there may not be many assets left to take action against)