Member Article

Get The Chance To Save Your Business With A Voluntary Receivership

Voluntary receivership typically happens when the Board of Directors (BOD) of a business entity decides that the company does not have or will not have sufficient funds to pay off secured debts as and when they become due (secured debts also known as debentures, are monies borrowed by pledging selected marketable assets). If the BOD voluntarily passes a resolution appointing a administrative receiver to sell those assets and pay off the secured creditors then, such an arrangement is known as Voluntary Receivership.

In an inVoluntary Receivership, the secured creditors approach the court and the court appoints an administrative receiver to take over and sell the pledged assets at the best available market value.

The former i.e. voluntary receivership is more advantages to the business because however minor, there is some semblance of control and best efforts are made to secure the best possible market value for the assets. The secured or pledged assets are transferred to the administrative receiver who then proceeds to sell them to the best of his or her ability to secure the best market value. The monies so acquired, are used to offset the secured loans.

Administrative Receivership Services can spell disaster for the company because the BOD have no control over the administrator or the terms under which the administrator functions. These things will be decided by the court. In due course, the administrator might decide that monies that will be realised through sale of secured assets are not sufficient to offset all secured loans and therefore, the business itself needs to be dissolved so all assets whether secured or not can be sold and secured creditors paid off. This will spell the end of the business. From the Board of Directors and the share holders point of view, voluntary receivership is a far better legal and practical option. One the businesses is freed from secured creditors, it has breathing space to decide how best to continue and at least there is a good chance the business will survive the economic hardship and bounce back.

Bluntly put, voluntary receivership is like sending a patient to a hospital whereas, Insolvency Advisory Services is like sending the patient to the Undertakers in the hope they can somehow cure the patient.

With global terrorism and regional wars, the current global marketplace has become much more unpredictable than before. Perfectly viable businesses can unintentionally get caught up in regional conflicts and businesses can come to a standstill spelling economic disaster to all directly or indirectly connected with it. The same thing can also happen due to unpredictable weather and resulting cyclones that can destroy mines and equipment causing huge losses to a company.

Whatever be the cause of the hardship, it is more prudent for the Board of Directors to take the initiative and opt for voluntary receivership while there is still a good chance of securing decent value for their secured assets.

This was posted in Bdaily's Members' News section by Thomas Dawson .