In most cases a company borrows money and then agrees that if it defaults, the lender can appoint a receiver to manage the company. This is documented in a general security agreement or GSA.
To better understand the dynamics of receivership it is important to look at the various working parts:
Grantor
The borrower who grants a security interest to someone else over their property or assets is called the grantor.
General security agreement (GSA)
Holders of a general security agreement have a security interest over all the assets of the company, or over a specific class of assets. In insolvency cases, the priority of their claim will depend on the terms of the GSA and the timing of its registration on the Personal Property Securities Register (PPSR). GSA’s are a common tool used by financial institutions and other lenders to secure loans and credit facilities in case of a default.
Process
On first engagement we will review the security documents, GSA and other matters to verify the lender’s right to appoint, and to check there has been a relevant default.
Once appointed as receivers, we then have the power to run the business in receivership, including hiring staff, managing property, selling assets, and entering contracts.
Under receivership the director’s powers are suspended to allow the receiver to manage the affairs of the borrower or company. During the receivership the company/grantor must make all documents, bank details and relevant information, available to the receiver when requested.
As receivers we act primarily in the interest of the GSA holder that appoints us. However, we also have a general duty of care to the company and other creditors.
We report on the progress of the receivership within two months, and again after every six months. Any serious problems we become aware of during the receivership also need to be reported.