Receivership is the process in which creditors appoint a receiver to administer and receive their assets, so they can recoup their money. Usually, when a receiver is appointed by the bank (or any other type of company) it means your business is near its end. If you took out a loan using your asset as security (for example, inventory, property, or equipment), the lender has the right to seize possession of those assets, until you pay back the loan.

When a company cannot repay their loan, the bank (or the other secured lender) can take some of the following steps:

  • Assign investigating analysts so they can look into the finances of the company, to find out how secure (or not) the debt is. They will also determine the best way to proceed;
  • Demand a formal repayment of the loan, without any given notice;
  • Assign a receiver to supervise and regain the company’s assets.

Here are some ways you know your company is going into receivership:

  • You cannot pay your loan

What this means is your company is not making any profits and you cannot give back the share of the money you own.

  • You cannot afford to pay the bills

When the bills for your company arrive, you cannot pay them from the company’s budget, and you may think of getting another loan.

  • You cannot give salary to your employees

 A happy employee means a happy employer. To expect the best from your employees, you need to give them a regular salary. When you cannot afford to pay them their fair share, you risk losing your workers or even a lawsuit.

  • You are running out of savings

When you make a profit, you are able to repay your debt from it. When you are not making any profit, you need to pay the loan back from your savings. The company savings can help you for a month or two, but in the end, you will not be able to pay back the loan anymore.

If any of these things begin to happen to your company, the best thing you can do is consult a bankruptcy attorney. The professionals can help you with the problems you are facing, and will give you the best advice on how to move forward.

If your company goes into receivership, there are two possible outcomes:

  • The company’s assets are able to cover the debt and the company is able to continue operating;
  • The assets are not enough to cover the debt and, at this point, the company is completely dismissed and shut down, in order to repay as many of the debts as possible.

The best way to prevent receivership is to act as quickly as you can. In some cases, you will be able to put your business into an administrative procedure. In this time period, all legal actions against your business will be sustained for about 8 weeks. In those weeks, you can negotiate a formal arrangement with your creditors to give you the neede

Published by Emily Rose