If a company is in financial difficulty, a receiver may be appointed to take control of some or all of its assets to ensure the payment of secured creditors.
A secured creditor or the Court can appoint a Receiver – usually under the terms of a security document such as a General Security Agreement. The receiver’s job is to receive and realise the company’s assets, then distribute the proceeds to the secured creditor. Receivers and Managers also have the power to manage a business.
It is common for a Receiver and Manager to be appointed to a company at the same time as a voluntary administrator. The Receiver and Manager acts for the secured creditor, while the voluntary administrator looks after the interests of the whole body creditors.
In cases where there is a dispute stakeholders, the Court may appoint a Receiver or Receiver and Manager. This enables the dispute to be resolved by an independent party and often requires a detailed examination of the financial records of the business and the disposal of the business’ assets.
In simple terms – when acting as Receivers or Receivers and Managers, our key responsibilities are to collect and sell assets in order to repay what is owed to secured creditors.
Secured creditors should seriously consider appointing a receiver when a borrower defaults on their obligations because it represents the most direct and effective mechanism for protecting and recovering their secured debt.
Receivership gives the secured creditor a significant degree of control over the outcome, as the receiver’s primary duty is to act in the interests of the appointing creditor rather than the general body of creditors.
By appointing a receiver promptly upon default, secured creditors can prevent further dissipation or deterioration of assets, preserve the value of their security, and ensure those assets are realised in an orderly manner to maximise recovery.
Timing is critical in receivership appointments — acting too early or too late can significantly impact recovery outcomes. A secured creditor should consider appointing a receiver in the following circumstances:
Before pulling the trigger, a secured creditor should confirm:
| Consideration | Details |
|---|---|
| ✅ Valid security interest | Properly registered on the PPSR and legally enforceable |
| ✅ Default clearly established | All notice and demand requirements have been met |
| ✅ Receiver identified | A registered liquidator has been identified and has consented to act |
| ✅ Legal advice obtained | Independent legal advice confirms the appointment is legally sound |
| ✅ Commercial assessment done | Recovery prospects justify the cost of appointment |
Appoint early enough to preserve asset value, but not so early that the appointment is premature or legally vulnerable.
The secured creditor must ensure all contractual and legal prerequisites have been satisfied before appointment.
A wrongful or premature appointment can expose the creditor to significant liability and undermine their entire recovery strategy. Therefore, seeking experienced legal and insolvency advice before making the appointment is essential.
While receivership is a powerful enforcement tool, there are circumstances where it may not be the most appropriate option for secured creditors, these may include:
Insufficient Asset Value – If the value of the secured assets has deteriorated significantly, the costs of the receivership (including the receiver’s fees) may exceed the recoverable amount, leaving the secured creditor worse off financially.
Reputational Risk – Appointing a receiver can attract negative publicity and damage the creditor’s (particularly a bank’s) reputation, especially in high-profile cases or where the appointment is later challenged.
Risk of Wrongful Appointment – If the security agreement is defective, the debt is disputed, or proper default provisions have not been triggered, the secured creditor could face legal liability for a wrongful appointment, exposing them to damages claims.
Limited Asset Coverage -If the security only covers a narrow pool of assets, receivership may not provide sufficient recovery, making alternative enforcement options more practical.
Going Concern Destruction – Appointing a receiver can immediately destroy the goodwill and trading value of a business, potentially resulting in a lower overall recovery than a negotiated restructure or voluntary administration.
Preferential Treatment Risks – Certain transactions entered into prior to the appointment may be unwound by a subsequent liquidator, undermining the secured creditor’s recovery position.
| Party | Role |
|---|---|
| Secured Creditor | Appoints the receiver (e.g. a bank) |
| Receiver | Licensed insolvency practitioner who manages/sells assets |
| Directors | Lose control over secured assets but remain in office |
| Unsecured Creditors | Have lower priority; may receive little or nothing |
Below is a brief outline of the typical receivership process in Australia. Useful to get an idea of the general process and timelines involved.
The receiver has two primary options:
| Option | Details |
|---|---|
| Trade On | Continue operating the business to preserve value and maximise sale proceeds |
| Immediate Sale | Sell assets quickly if trading is not viable or would deplete value further |
Funds recovered are distributed in the following priority order:
Throughout the receivership the receiver must:
The receivership concludes when:
The receivership process is designed to be swift and commercially focused, prioritising the recovery of the secured creditor’s debt through the orderly realisation of secured assets.
The process requires the receiver to balance speed of recovery with the obligation to act in a commercially reasonable manner to maximise returns.
| Feature | Receivership | Liquidation |
| Who appoints? | A secured creditor (Bank/Lender). | Shareholders or the Court. |
| Who is the priority? | The appointing secured creditor. | All creditors (by legal priority). |
| Company Future | May survive if debts are cleared. | The company is dissolved/ends. |
| Investigation | Focuses on asset recovery. | Includes investigation of director conduct. |
| Trading Status | Often continues trading to sell as a “going concern.” | Trading usually ceases immediately. |
Receivership is fundamentally a debt recovery tool for secured creditors, it is not designed to rescue the company or protect unsecured creditors.
If you are a creditor, employee, or director dealing with a receivership, it is critical to seek independent legal and financial advice as early as possible.
Jirsch Sutherland has wide-ranging experience acting as Receivers, or Receivers and Managers, for financial institutions and other secured creditors and also with court appointments to resolve partnership disputes.
If you need professional assistance navigating a receivership matter in Australia, consider contacting our team of registered liquidators.
Get in touch today for professional advice.
Receivership is an insolvency process where a secured creditor appoints a receiver to take control of and realise a company’s secured assets to recover an outstanding debt. It is governed by the Corporations Act 2001 (Cth).
A receiver must be a registered liquidator licensed by ASIC. They must be independent, have no conflict of interest, and must consent to the appointment in writing before taking office.
A receiver can be appointed in two ways:
| Secured Creditor | Unsecured Creditor |
|---|---|
| Holds a charge or mortgage over company assets | Has no security over company assets |
| Has priority claim over secured assets | Ranks behind secured creditors |
| Appoints the receiver | Cannot appoint a receiver |
| Generally recovers more in a receivership | May receive little or nothing |
Unsecured creditors have very limited rights in a receivership. They:
Yes – unlike voluntary administration, receivership does not impose an automatic moratorium on legal proceedings against the company. However, any judgment obtained cannot be enforced against assets subject to the receivership without the receiver’s consent or a Court Order.
This depends entirely on whether there are surplus funds remaining after the receiver has repaid the secured creditor and all receivership costs. In most cases, unsecured creditors receive little to nothing from a receivership.
Yes. The receiver is required to:
Yes. Directors must:
Yes. Directors can challenge the appointment if:
Directors may continue to trade parts of the business not subject to the receivership, however this is subject to the receiver’s control and oversight. Directors must be extremely cautious about incurring new debts and should seek legal advice immediately.
Yes. Certain employee entitlements receive priority payment before the secured creditor is repaid, including:
The Fair Entitlements Guarantee (FEG) is a Federal Government scheme that acts as a safety net for employees who cannot recover their entitlements through the receivership process. It covers:
If the receiver decides to trade the business on, employees will generally continue to be paid their wages as an expense of the receivership. However this is not guaranteed and employees should seek clarification from the receiver directly.
Note: The information provided is for general purposes only. It is not financial or legal advice. Please get in touch with a qualified expert from our team.
