Receivership Level 1

Question 1

What are the different forms of Insolvency?

Answer 1

Administration
Receivership
Liquidation
Company voluntary arrangement

Question 2

What is administration?

Answer 2

it creates a period of protection of a company for the administrator to deal with the assets in an appropriate way in order to save a company

Question 3

What is receivership?

Answer 3

used when a company or individual defaults in payment to a lender who is secured by a fixed charge.

Question 4

what is liquidation?

Answer 4

Liquidation is the process of bringing a business to an end and distributing its assets to claimants.

Question 5

What is a CVA?

Answer 5

A CVA is a legally binding agreement with your company’s creditors which allows a proportion of its debts to be paid back over time.

Question 6

What is a deed of appointment?

Answer 6

formally appoint receivers on behalf of a lender or charge holder.

Question 7

what is the purpose of a deed of appointment

Answer 7

formally appoint a receiver, outlines scope of the receivers duties.

Question 8

Where do we get our powers from?

Answer 8

Legal charge and the law of property act 1925.

Question 9

What do you ask for when you instruct solicitors?

Answer 9

Validity report

Question 10

Why do you ask for a validity report?

Answer 10

To identify the receivers right to sell the property within the charge.

Question 11

What powers does a receiver get from the Law of Property Act?

Answer 11

Right to insure
Right to collect rent
Right to pay ourselves a fee

Question 12

What are the risks of being appointed under a second charge?

Answer 12

first charge holder has priority
if the first charge holder appoints receivers I would have to step down
the first charge holder benefits from proceeds of
lender of second change would be responsible for paying our fee.

Question 13

How does council tax / rates work within receivership?

Answer 13

receivers are not liable for council tax or business rates

Question 14

What should you consider if there are people working on site?

Answer 14

Transfer of Undertakings Protection Employment

Question 15

What is the receivers powers in relation to TUPE?

Answer 15

Receivers have 14 days to rescind or put on new contracts, if people on site were important to the running of the property then I would consider new contracts, however if they had a relation to the borrower and could potentially cause damage to the property then I would consider rescinding the contract.

Question 16

How do receivers fees work?

Answer 16

charge a fee based on estimated realisation, cannot exceed 5% under LPA act.

Question 17

What is the receivers duty when it comes to betterment?

Answer 17

The Receiver has an obligation to maximise an assets realisation but no duty for betterment (Silven v RBS)

Question 18

How do you check if VAT is applicable to a property?

Answer 18

Contact HMRC to check whether VAT is applicable

Question 19

what are the biggest risks to a receiver?

Answer 19

health and safety
being sued for sale of property undervalue

Question 20

Why do you need to formally tell the solicitors that you have accepted the appointment?

Answer 20

They need to produce a validity report

Question 21

What is a validity report?

Answer 21

Validity report includes the details of the charge which gives the receivers the powers to sell.

Question 22

What if the receivers did not have the power to sell?

Answer 22

We would have to get written consent from the Lender to sell the property.

Question 23

What would you look for in a validity report?

Answer 23

any second charges
power to sell
any enforcement notices

Question 24

where does the power of sale come from?

Answer 24

comes from the charge document.

Question 25

If the debt is recovered in full who pays the fees?

Answer 25

Borrower, debt is paid back to the lender any overage is paid back to the borrower less the costs.

Question 26

If the debt is not recovered in full who pays the fees?

Answer 26

Lender,

the lender can pursue the borrower for remaining debt plus costs.

Question 27

What is insolvency

Answer 27

An individual or companies inability to pay their debt.

Question 28

Who appoints administrators and liquidators?

Answer 28

Court appointed

Question 29

What’s the difference between voluntary and compulsory liquidation?

Answer 29

voluntary liquidation is when a cannot pay its debts and you involve your creditors when you liquidate it.

compulsory liquidation - your company cannot pay its debts and you apply to the courts to liquidate it.

Question 30

If administrators are appointed what happens to receivers?

Answer 30

the receivers may be asked to step down,

we would need administrators consent to sell the property

Question 31

What is the difference between LPA receivers and Fixed Charge Receivers?

Answer 31

LPA receivers have very limited statutory powers. They can collect rent but have no power of sale where fixed charge receivers do.

Question 32

what must be on every deed of appointment?

Answer 32

Lender
Borrower
Receivers
Property Address
Details of appointment
Details of acceptance
Date and time of acceptances / receipt of appointment

Question 33

Is there a prescribed timescale for an individual?

Answer 33

not for an individual however as Allsop as best practice we accept within 24 hours.

Question 34

who is the mortgagee?

Answer 34

Lender

Question 35

who is the mortgaor?

Answer 35

Borrower

Question 36

What is voluntary and compulsory liquidation?

Answer 36

Voluntary - formal process of winding up a company (e.g when director retires)

Compulsory - creditor forces liquidation by applying to court for liquidator to be appointed

Question 37

How does liquidation affect receivership?

Answer 37

I would report all fees and costs to the liquidator

Agency falls away

Question 38

How does bankruptcy affect receivership?

Answer 38

agency falls away

Question 39

How does administration affect receivership?

Answer 39

whether appointed pre or post appointment they can ask receivers to step down

Question 40

What is a debtor and creditor?

Answer 40

The debtor is the party that owes the money (debt), while the creditor is the party that loaned the money.