15.1 Meaning of receivership, administration and dissolution

15.1 MEANING OF RECEIVERSHIP, ADMINISTRATION AND DISSOLUTION

Receivership

Receivership is a legal process in which a receiver is appointed by a creditor or a court to take control of a company’s assets, operations, and finances. It typically occurs when a company fails to repay its debts or breaches its financial obligations. The receiver’s role is to protect the interests of the secured creditor and maximize the recovery of funds owed to them.

Administration

Administration is a formal insolvency procedure that aims to protect a company’s assets and maximize the chances of business survival or achieve a better outcome for creditors. It involves the appointment of an administrator, who takes control of the company’s operations and manages its affairs. The administrator’s primary objective is to rescue the company as a going concern, sell it as a whole, or achieve a better result for creditors than in a liquidation scenario.

Dissolution

Dissolution refers to the process of legally winding up and terminating the existence of a company. It can occur voluntarily or involuntarily. Voluntary dissolution happens when the shareholders and directors of a solvent company decide to cease its operations and wind up its affairs. Involuntary dissolution can occur when a company fails to comply with legal and regulatory requirements, faces insolvency, or is ordered by a court to be dissolved. During dissolution, the company’s assets are liquidated, debts are paid, and any remaining funds are distributed to shareholders in accordance with legal priorities.