Fixed charge receivership

Question 1

explain what this is and when it can be used

Answer 1

a fixed charge holder can appoint a receiver to protect their interest in the secured asset.

a creditor will have a right to exercise this power from the terms of the security agreement, this will set out when the power can be exercised. The company does not necessarily need to be insolvent.

Question 2

who does the receiver owe their duty to?

Answer 2

The duty is owed to the specific creditor, not all creditors

Question 3

what power does a receiver typically have under the security agreement?

Answer 3

o Power to take possession of the asset
o Power to sell/dispose of the asset
o Power to protect the asset i.e. insure it

Question 4

explain what happens on the sale of the asset

Answer 4

If the asset is sold and doesn’t release enough money to pay the debt, the creditor becomes an unsecured creditor for the remainder. Any surplus is given back to the company

Question 5

how does the exercise of this power affect other creditors and D?

Answer 5

• This does not prevent other creditors from taking action against the company
• Ds lose management power over the asset