Receivership
Most directors who contact us after being threatened with receivership are not actually facing receivership. They are facing administration, compulsory liquidation, or enforcement action from an unsecured creditor. Receivership is a specific procedure, historically important and now relatively rare, and understanding what it actually is shapes what your options are.
Receivership is a secured creditor’s enforcement mechanism. A bank or lender with a fixed or floating charge over your company’s assets appoints a receiver to take control of those assets, realise them, and apply the proceeds to the debt owed.
The company is not automatically wound up. Directors are not automatically removed. The receiver works for the appointing creditor, not for you, not for unsecured creditors, and not for the court.
What Receivership Means for a Business in Practice
The letter from the lender arrives on a Tuesday. By Thursday, a receiver has been appointed and has written to the company’s bank. The account is frozen to anything that runs through the charged assets. If those assets include stock, equipment, or property the business needs to trade, operations can halt within days.
Directors remain in office. They retain duties under the Companies Act 2006 and the Insolvency Act 1986 to act in the company’s best interests. But they lose operational authority over everything the receiver has been appointed to control.
The receiver takes possession, collects income from charged property, and begins preparing for sale. They do not need your permission. If the charge document gives them the power to appoint out of court, the appointment is immediate.
There is no automatic moratorium. Other creditors, including HMRC, trade suppliers, and anyone holding an unpaid county court judgment, can continue enforcement action during receivership. This distinguishes it sharply from administration, which carries a statutory moratorium from day one.
The Three Types of Receivership Directors Need to Know
The label “receivership” covers three different things with different legal foundations and different practical consequences for your business.
LPA receivership (Law of Property Act 1925, ss.101 to 109) is the most common form still operating today. It applies to fixed charges over land and property secured by a legal mortgage. The mortgagee, usually a bank, appoints a receiver to collect rents or sell the property. This receiver’s authority is limited to the charged property. The rest of the business continues under director control.
Administrative receivership was the dominant corporate insolvency tool before the Enterprise Act 2002. An administrative receiver, a licensed insolvency practitioner, could be appointed under a qualifying floating charge and take control of substantially the whole company’s assets.
The Enterprise Act abolished administrative receivership for floating charges created after 15 September 2003, replacing it with administration as the preferred collective rescue procedure. For most SMEs with post-2003 lending, it is not available to your lender.
Court-appointed receivership is the least common. A court may appoint a receiver as a remedy in civil proceedings, for example in disputes over company assets or enforcement of injunctions. This is specialist territory and rarely the first thing a director reading this page is dealing with.
Why Receivership Is Rare for Most Directors Now
This is worth being direct about. If you are searching for “receivership” because your bank is threatening action or a creditor has issued a statutory demand, the procedure you are most likely facing is not receivership at all. It is administration, compulsory liquidation via a winding-up petition, or enforcement by an unsecured creditor.
Administrative receivership, the form that took over whole businesses, is largely gone. Banks with post-2003 lending use administration instead. The administration regime under Schedule B1 of the Insolvency Act 1986 provides the moratorium banks and large secured creditors actually want, and it gives them the ability to appoint an administrator out of court without needing a winding-up petition. Where a creditor does take court action, our guide to compulsory liquidation explains how the company is wound up by the court.
LPA receivership over property remains active. If your company owns commercial property and has defaulted on the mortgage, an LPA receiver appointment is entirely possible. But its scope is limited to that property, not the whole business.
We flag this because conflating receivership with administration is a real risk. The options available, and the urgency of the timeline, differ substantially between them. When we speak with directors at this point of confusion, the first thing we establish is which process is actually in play, because the answer changes almost everything about what you can do next.
What Directors Owe During Receivership
Your duties do not disappear because a receiver has been appointed. You still owe duties under s.172 of the Companies Act 2006 to act in the way most likely to promote the success of the company. At or near insolvency, that means prioritising the interests of creditors as a whole rather than shareholders.
You must cooperate with the receiver: provide books, records, and keys; facilitate access to the charged assets; and do not deal with charged assets without the receiver’s written consent. The receiver is entitled to act in the name of the company in relation to charged assets. Interference may constitute a breach of duty that a liquidator can subsequently pursue against you personally. Our guide to a director’s position in liquidation sets out how that conduct is examined if a liquidation follows.
You are also still responsible for uncharged assets and for meeting statutory filing obligations, including confirmation statements, accounts, and HMRC returns. These obligations continue regardless of the receivership.
Alternatives to Receivership That May Still Be Available
If you are facing the threat of receivership rather than the event itself, there may still be time to change the outcome. This is the window that matters.
Administration provides an automatic moratorium from the moment of appointment and is designed to rescue the company or achieve a better outcome for creditors than immediate winding-up. If the lender threatening receivership holds a qualifying floating charge created after September 2003, administration is their default route anyway.
A director can also place the company into administration voluntarily, ahead of enforcement action. We see this used most effectively when the director moves in the week between a covenant breach notice and any formal appointment.
A Company Voluntary Arrangement may work if the business is fundamentally viable but has a debt problem it cannot resolve without restructuring. A CVA requires 75% creditor approval by value and does not include an automatic moratorium, but eligible smaller companies can apply for one under Part 1A of the Insolvency Act 1986.
Refinancing or negotiating a standstill with the lender remains possible until the appointment has been made. Once a receiver is appointed, that conversation is over.
Your Next Step
If a receiver has already been appointed, act on two fronts immediately: take legal advice on your ongoing director duties and personal exposure, and understand the scope of the receiver’s authority. Specifically, whether uncharged assets give you room to continue any trading operations.
If the receivership is likely to be followed by a wind-up, our liquidation hub explains how company liquidation works and what it means for directors.
If you are at the pre-appointment stage, in that space between the lender’s covenant breach notice and any formal appointment, you are in the window where alternatives remain real. That window closes without warning.
At Company Debt, our licensed insolvency practitioners work with directors at this point, not afterwards. The directors who come to us before enforcement begins almost always have more options than those who wait. Call 0800 074 6757 for a confidential conversation about what is genuinely available to you.
FAQs on Receivership
Is a court order required to appoint a receiver?
No. The most common forms of receivership, including LPA receivership over property, are appointed out of court under powers contained in the mortgage or debenture document. The lender exercises those powers by delivering a deed of appointment to the receiver. Court appointment is possible and happens in certain civil proceedings, but it is not the standard route for a bank enforcing security.
Do directors lose their positions when a receiver is appointed?
No. Directors remain in office and retain their statutory duties. They lose authority over the charged assets, which pass to the receiver’s control, but remain responsible for uncharged assets, ongoing statutory filings, and any parts of the business the receiver is not managing. Taking legal advice on exactly where your authority begins and ends is worth doing immediately.
How does receivership differ from administration?
Receivership enforces a specific creditor’s security and carries no automatic moratorium. Administration is a collective procedure under Schedule B1 of the Insolvency Act 1986, overseen by a licensed insolvency practitioner, and includes an immediate moratorium protecting the company from all creditor action.
Administration’s primary purpose is to rescue the company as a going concern or achieve a better outcome for creditors as a whole. For most companies with post-2003 lending, administration has replaced administrative receivership as the bank’s enforcement tool of choice. Our advice to directors is to understand which regime applies before assuming they know what the bank can do.
Can a company challenge a receiver’s appointment?
Yes, but the grounds are narrow. A challenge typically requires showing that the security was invalid, the appointment was defective in form, no trigger event had occurred under the security document, or the receiver acted outside their authority.
Courts will not interfere simply because the appointment is commercially damaging. If you believe the appointment was improper, you need a solicitor immediately because delay reduces your options.
Are directors personally liable for company debts in receivership?
Not automatically. The company is the debtor, not you personally. Personal liability arises separately: most commonly from personal guarantees you have given to the lender, from wrongful trading if you allowed the company to incur liabilities when there was no reasonable prospect of avoiding insolvent liquidation, or from fraudulent conduct.
If receivership is followed by liquidation, a liquidator will review transactions and director conduct.
Does receivership lead to liquidation?
Often yes, but not automatically. If the receiver realises the charged assets and the proceeds clear the secured debt, the receivership ends and the company technically remains.
In practice, if operations have been disrupted, a liquidation commonly follows. LPA receivership over a single property may leave the business intact. Administrative receivership over the whole business almost always ended in wind-up.
