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ACCA Applied Skills · Corporate and Business Law (Global) · Insolvency and administration

Fenwick Co has granted a bank a fixed charge over its factory and a floating charge over its other assets. The company defaults, and the bank appoints a receiver under the debenture. In whose interests does the receiver primarily act, and who appointed them?

The receiver is appointed by the secured creditor under the charge and mainly acts to realise the secured assets to repay that creditor. They must act in good faith and obtain a proper price, but they do not primarily serve unsecured creditors or shareholders.

  1. AThe appointing secured creditor, who appointed the receiver, so the receiver's main duty is to realise assets to repay that creditorCorrect
  2. BAll the unsecured creditors equally, as the receiver is an officer of the court
  3. CThe shareholders, to maximise the value of their shares

Explanation

A receiver appointed under a charge is appointed by the secured creditor to realise the secured assets and repay that debt. The receiver's primary duty is to the appointing creditor, though they must act in good faith and take reasonable care over sale price. They do not act for unsecured creditors or shareholders.

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