The function of a receiver appointed by a debenture holder is to take possession of the assets subject to the debenture holder’s charge. The receiver will realise those assets and pay off the debenture holder.
In some cases, the receiver may decide to continue the Company’s business with a view to increasing the value of the Company’s assets, or with a view to selling the business as a going concern. It may be particularly attractive to a receiver to sell the business as a going concern if it could mean that all of the employees, with their accumulated redundancy entitlements, were transferred to a new purchaser. The absence of redundancy claims in a receivership may increase the prospects of a debenture holder recovering its lending under its floating charge.
A charge on a Company’s assets may be categorised as fixed e.g. a mortgage on a freehold property or as a “floating” charge e.g. on stock. Following the Supreme Court decision in the Belgard Motors case, floating charges may be effectively the same type of charge as a fixed charge, provided the wording of the debenture and the demand letters are in appropriate terms.