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Government sentiment is moving against
the concept of a receiver, as such a receiver holds allegiance
only to one party - the debenture holder who appointed the
receiver.
In June 2001 the Department of Trade
and Industry announced the intention to legislate in due course
to abolish the concept of a receiver. The new law that comes
into effect on the 15th September 2003 only abolishes the
power to appoint receivers however, if the debenture was created
after that date.
A receiver is a very powerful animal.
He:
- may dismiss directors and other
employees
- has sole responsibility for
management
- may close down a business with
immediate effect or choose to continue trading
- abandon contracts
- sell the business
The priority aim of the receiver
is to raise sufficient cash to repay his appointor (the debenture
holder) in full.
The receiver has no duty to act
in the best interests of creditors generally as his main aim
is to satisfy his appointor.
A receivership is usually followed
by a liquidation. The liquidator, a separate person, examines
the validity of the appointment of the receiver and the receivers
actions to see if such actions were appropriate.
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