Receivership Level 1 Flashcards
What are the different forms of Insolvency?
Administration
Receivership
Liquidation
Company voluntary arrangement
What is administration?
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
What is receivership?
used when a company or individual defaults in payment to a lender who is secured by a fixed charge.
what is liquidation?
Liquidation is the process of bringing a business to an end and distributing its assets to claimants.
What is a CVA?
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.
What is a deed of appointment?
formally appoint receivers on behalf of a lender or charge holder.
what is the purpose of a deed of appointment
formally appoint a receiver, outlines scope of the receivers duties.
Where do we get our powers from?
Legal charge and the law of property act 1925.
What do you ask for when you instruct solicitors?
Validity report
Why do you ask for a validity report?
To identify the receivers right to sell the property within the charge.
What powers does a receiver get from the Law of Property Act?
Right to insure
Right to collect rent
Right to pay ourselves a fee
What are the risks of being appointed under a second charge?
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.
How does council tax / rates work within receivership?
receivers are not liable for council tax or business rates
What should you consider if there are people working on site?
Transfer of Undertakings Protection Employment
What is the receivers powers in relation to TUPE?
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.
How do receivers fees work?
charge a fee based on estimated realisation, cannot exceed 5% under LPA act.
What is the receivers duty when it comes to betterment?
The Receiver has an obligation to maximise an assets realisation but no duty for betterment (Silven v RBS)
How do you check if VAT is applicable to a property?
Contact HMRC to check whether VAT is applicable
what are the biggest risks to a receiver?
health and safety
being sued for sale of property undervalue
Why do you need to formally tell the solicitors that you have accepted the appointment?
They need to produce a validity report
What is a validity report?
Validity report includes the details of the charge which gives the receivers the powers to sell.
What if the receivers did not have the power to sell?
We would have to get written consent from the Lender to sell the property.
What would you look for in a validity report?
any second charges
power to sell
any enforcement notices
where does the power of sale come from?
comes from the charge document.
If the debt is recovered in full who pays the fees?
Borrower, debt is paid back to the lender any overage is paid back to the borrower less the costs.
If the debt is not recovered in full who pays the fees?
Lender,
the lender can pursue the borrower for remaining debt plus costs.
What is insolvency
An individual or companies inability to pay their debt.
Who appoints administrators and liquidators?
Court appointed
What’s the difference between voluntary and compulsory liquidation?
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.
If administrators are appointed what happens to receivers?
the receivers may be asked to step down,
we would need administrators consent to sell the property
What is the difference between LPA receivers and Fixed Charge Receivers?
LPA receivers have very limited statutory powers. They can collect rent but have no power of sale where fixed charge receivers do.
what must be on every deed of appointment?
Lender
Borrower
Receivers
Property Address
Details of appointment
Details of acceptance
Date and time of acceptances / receipt of appointment
Is there a prescribed timescale for an individual?
not for an individual however as Allsop as best practice we accept within 24 hours.
who is the mortgagee?
Lender
who is the mortgaor?
Borrower
What is voluntary and compulsory liquidation?
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
How does liquidation affect receivership?
I would report all fees and costs to the liquidator
Agency falls away
How does bankruptcy affect receivership?
agency falls away
How does administration affect receivership?
whether appointed pre or post appointment they can ask receivers to step down
What is a debtor and creditor?
The debtor is the party that owes the money (debt), while the creditor is the party that loaned the money.
