When a lender starts talking about enforcing its security, it can feel as if events are running away from you. Terms like “receivership” appear in letters and legal documents, but no one has taken the time to explain what they actually mean for you, your business and the people who rely on it.
Receivership does not usually arrive out of the blue and you are not powerless. By understanding what receivership is, how the process works in the UK and what the likely outcomes look like in practice, you can start to regain a sense of control. This guide sets out in plain English how receivership works, how it differs from administration and liquidation, and how early, regulated advice from Anderson Brookes can protect you before a lender takes that final step.
What Is Receivership?
Receivership is a type of corporate insolvency procedure where a secured lender appoints an independent receiver to take control of some or all of a business’s assets and realise them to repay what is owed to that lender. It is usually a contractual remedy that comes from the terms of the loan and the security documents, rather than something started by the court.
In many cases the lender has taken security by way of a debenture or legal charge that creates fixed and sometimes floating charges over company assets. If “events of default” in that document occur, such as missed repayments or a breach of covenants, the lender can enforce its security and appoint a receiver over the charged assets.
There are two main forms of receivership in the UK:
- Fixed charge or LPA receivership: This usually affects specific secured assets, often property. A fixed charge or Law of Property Act (LPA) receiver focuses on those assets only.
- Administrative receivership: Less common for new lending, this involves an administrative receiver appointed under an older qualifying floating charge with wide powers to run or sell substantially all of the company’s business and assets for the benefit of the lender.
In simple terms, receivership usually means:
- A secured lender is enforcing its rights under security.
- A receiver steps in to control and sell secured assets.
- The main goal is to repay that lender, not to rescue the company.
That focus on the lender’s recovery is one of the key differences between receivership and other insolvency procedures.
Receivership, Administration and Liquidation: Key Differences
In everyday conversation, people often use receivership, administration and liquidation as if they were interchangeable. They are not. Each has its own purpose, rules and outcomes.
At a high level:
- Receivership is about realising secured assets for one lender.
- Administration aims to rescue the company or improve the result for creditors as a whole.
- Liquidation brings the company’s life to a formal end.
Receivership vs Administration
In receivership, control of the secured assets passes to the receiver. The receiver’s job is to recover what they can for the appointing lender. Other creditors may benefit indirectly, but they are not the main focus of the receivership process.
Administration works differently. An administrator is appointed to take over the running of the company as a whole. By law, the administrator must work towards one of three statutory purposes, in order of priority:
- Rescuing the company as a going concern.
- Achieving a better result for creditors as a whole than liquidation would give.
- Realising property to pay secured or preferential creditors.
Administration usually brings in a legal moratorium. This prevents most creditors, including lenders, from taking further enforcement action without court consent while options are explored. That breathing space is why administration is often seen as a rescue or restructuring tool, while receivership is a lender enforcement tool.
If enforcement is being discussed, it can help to step back and look at wider steps to take when navigating insolvency, rather than focusing only on what your lender might do next.
Receivership vs Liquidation
Liquidation is different again. In liquidation, the company stops trading and a liquidator is appointed to realise the company’s remaining assets and distribute the proceeds to creditors, usually before the company is dissolved. It is a terminal process; the company does not come back from liquidation.
There are several forms of company liquidation, including creditors’ voluntary liquidation and compulsory liquidation through the courts, each following a structured liquidation process.
Receivership does not itself close the company. The receiver’s role is focused on the secured assets and the lender. Once those assets have been dealt with, however, the company often has little or nothing left. At that point liquidation usually follows. You may still have a say in your options when it comes to liquidation, including the most appropriate route for closure and keeping liquidation costs affordable.
Seeing receivership in the wider context of business insolvency and liquidation can make it easier to understand where you are on the insolvency timeline.
When Can a Receiver Be Appointed?
Receivership usually starts when a secured lender decides that informal attempts to recover its money are no longer enough. The exact point at which a receiver can be appointed depends on the loan agreement and the security documents, but there are common triggers.
Most secured business lending is supported by a legal charge or debenture. These documents set out “events of default”. Once one of those events occurs, the lender can usually enforce its security and appoint a receiver, often without going to court.
Typical triggers include:
- Missing capital or interest payments
- Persistently paying late or falling into arrears on a mortgage or secured loan
- Breaching financial covenants such as debt service cover ratios or loan to value tests
- Allowing priority debts, such as tax or employee arrears, to build up in a way that worries the lender
For property-backed borrowing, lenders often use their rights under the Law of Property Act 1925 to appoint an LPA or fixed charge receiver once the debt is due and in default. Where an older qualifying floating charge exists, the debenture holder may still be able to appoint an administrative receiver over substantially all of the business.
Before receivership, you will often see a build up of lender activity: more frequent calls, formal demand letters, requests for information, and sometimes independent reviews. All of these are warning signs that enforcement is being considered, even if the word “receivership” has not yet been used.
If you are receiving demands, enforcement threats or references to a possible sale of secured assets, that is the time to seek regulated insolvency advice, not to wait and hope things improve on their own.
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The Receivership Process: Step by Step
Once a lender decides to enforce, the receivership process usually follows a recognisable pattern. Every case is different, but the broad receivership timeline looks like this.
1. Pre-Appointment Warning Signs
This stage begins with pressure from the lender. You may see:
- Formal demands for repayment
- Requests for detailed financial information and forecasts
- Independent business reviews or valuations
- References to possible enforcement under the security
This is often the last realistic opportunity to renegotiate, refinance, sell non core assets or explore other business insolvency options with support from a specialist.
2. Appointment of the Receiver
If matters cannot be resolved and an event of default has occurred, the lender can appoint a receiver under the terms of its security. The document will set out the procedure, for example written notice naming the proposed receiver.
The receiver is usually a licensed insolvency practitioner experienced in receivership work. In administrative receivership, they have wide statutory powers to manage and sell the company’s business and assets for the benefit of the charge holder.
You will receive formal notification of the appointment. From that point, control of the charged assets shifts to the receiver.
3. The First Days of Receivership
The first few days are often intense. The receiver will:
- Secure physical and online assets, including stock, property and bank accounts
- Gather key records, including accounts, contracts and employee information
- Assess the financial position and immediate risks
You will usually be asked for information quickly. Although it can feel intrusive, you remain a director while the company exists and must still comply with your general duties under company law, as set out in official guidance for company directors.
During this early phase the receiver will decide whether a short period of trading is justified, whether a quick business sale is realistic, or whether an orderly break-up is more appropriate.
4. Trading, Stabilising and Marketing
In some receiverships the business continues to trade for a limited period. The aim is to preserve value while a buyer is found, not to restructure the company for the long term. The receiver may:
- Keep key staff on
- Honour certain contracts
- Purchase essential supplies where this supports value
At the same time they will arrange valuations and market the business or assets. This might involve advertising, approaching known trade buyers, contacting investors or organising auctions. Where ongoing trade is not viable, the receiver may move quickly to close sites and sell stock, property and equipment.
5. Distributions and Ending Receivership
Once the main assets have been realised and funds collected, the receiver will:
- Pay their fees and costs
- Apply proceeds towards the secured lender’s debt
- Account to any other security holders who rank ahead of or alongside the appointing lender
Unsecured creditors rarely receive anything from the receivership itself. Any surplus, if there is one, is usually dealt with in a later liquidation.
When there is nothing further to realise, the receiver will finalise their accounts, report to the lender and end the appointment. In many cases the company is then placed into liquidation to complete the formal closure.
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How Receivership Affects Different Stakeholders
Receivership is not just a legal process. It affects people. Understanding what it means for each group can help you plan your next steps.
Directors
On appointment, you usually lose control of the secured assets and, in administrative receivership, of the business. That can feel like a sudden loss, especially if you have built the company over many years.
Your responsibilities do not disappear. You must still:
- Act in the interests of creditors once insolvency is likely.
- Keep proper books and records.
- Cooperate with the receiver and later, if it occurs, with any liquidator.
Failure to cooperate can cause serious difficulties later, especially if the company enters liquidation and your conduct is reviewed.
If you have signed personal guarantees, receivership can also lead to claims against you personally once the shortfall to the lender is known. This is one of the most worrying aspects for many directors. Early advice helps you understand your position, prepare for negotiations and avoid steps that could increase your personal risk.
Employees
Employees are often the first to worry when they hear that a receiver has been appointed. In some cases the business continues to trade for a period and jobs carry on while a sale is explored. In others, trading stops quickly and redundancies follow.
If roles are made redundant, staff may be able to claim certain sums such as redundancy pay, unpaid wages, holiday pay and notice pay from the government where the employer is insolvent, using the service described in guidance on your rights if your employer is insolvent.
You may find yourself trying to support your team while also dealing with the receiver and lender. Understanding the process can make those conversations easier and help you protect your own position.
Secured Lenders
For secured lenders, receivership is a recovery tool. By appointing a receiver, the lender puts a specialist in charge of the secured assets with powers to sell them and reduce or clear the debt.
The lender’s main concerns are:
- Protecting the value of its security
- Minimising losses
- Managing reputational and regulatory risk
It does not run the company itself. It relies on the receiver to act in line with the security and insolvency law, and will approve key decisions such as major asset sales.
Knowing the lender’s priorities can help you focus on realistic proposals, for example repayment plans, orderly asset sales or alternative refinancing.
Unsecured Creditors and Landlords
Unsecured creditors, including many suppliers and landlords, usually have little say in whether a receiver is appointed. They may only learn of the appointment after it has happened.
In receivership, the receiver’s duty is primarily to the appointing lender and to any prior-ranking security. Only if there is a surplus after those claims and costs will anything be available for unsecured creditors, and even then it is more common for that surplus to be dealt with in a later liquidation.
Suppliers may have orders cancelled or renegotiated. Landlords may be affected by decisions on whether to keep trading from certain sites or whether leases are disclaimed. It can be a difficult and uncertain time for them.
Likely Outcomes of Receivership
Every receivership is unique, but most result in one of a small number of outcomes.
Going Concern Sale
A common outcome is a sale of the business as a going concern. The receiver may trade for a short period while marketing the business. This approach can preserve value in goodwill, customer relationships and staff, and may lead to a better price than breaking up the assets.
If a going concern sale happens:
- Some or all employees may transfer to the buyer.
- Contracts and the brand may continue under new ownership.
- The original company may still have remaining debts to address.
Break-Up Sale of Assets
Where a going concern sale is not realistic, the receiver may opt for a break-up sale. Assets such as property, plant, stock and intellectual property are sold separately.
This can be quicker, especially if trading has already stopped or there are serious risks in continuing. However, piecemeal sales often realise less than a well planned business sale, which can increase any shortfall to the lender and reduce the chance of a return for unsecured creditors.
Closure, Liquidation and Remaining Liabilities
Where receivership ends without a viable sale, the business closes, staff are made redundant and remaining assets are sold. Once the receiver has completed their work, the company is often placed into liquidation to bring its affairs to an orderly end.
Even after all assets have been sold there may still be debts left unpaid. These might include:
- A shortfall to the secured lender, which may trigger personal guarantees.
- Unsecured creditor balances that fall into the liquidation.
- Personal exposure for directors, such as guarantees or overdrawn loan accounts.
Handled in the right way, receivership does not have to mean the end of the road. With early, calm advice it is often possible to manage remaining liabilities and agree sensible settlements.
Anderson Brookes’ licensed insolvency practitioners can help you to deal with the receivership process. Call us today on 0800 1804 935 or email us at advice@andersonbrookes.co.uk.
Common Questions About Receivership
Is receivership the same as bankruptcy?
No. Bankruptcy applies to individuals. Receivership is a corporate insolvency procedure used when a lender enforces security over a company’s assets.
Can receivership be stopped?
Once a receiver has been validly appointed, it is difficult to stop the process. The best time to avoid receivership is before appointment, by negotiating with the lender, refinancing or exploring formal rescue options.
Will I be personally liable for company debts?
Most company debts remain with the company, but personal guarantees, overdrawn director loans and some tax liabilities can create personal exposure. It is important to understand this early.
Does receivership always lead to liquidation?
Not always, but in practice many companies do enter liquidation after receivership, especially where there are few assets left or ongoing trading is not viable.
Next Steps
Receivership is a serious step, but it is also a structured process. A secured lender enforces its rights, appoints a receiver and that receiver takes control of certain assets to recover the debt. It is different from administration, which focuses on rescuing the business or improving the outcome for creditors as a whole, and from liquidation, which brings the company’s life to a close.
You do not have to wait for receivership to happen to you. If a lender is talking about enforcement, if you are in arrears or if you simply feel that receivership might be on the horizon, now is the time to talk. Early insolvency advice from us can open up options such as negotiation, refinancing, administration or voluntary liquidation, before a receiver is appointed and choices narrow.
At Anderson Brookes we will listen without judgement, explain receivership and other options in plain English and help you plan your next steps with confidence. If you are facing pressure from a secured lender or are concerned about receivership, contact us for a confidential discussion about your situation and the support available to you.
