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

Harlan plc has granted a bank a floating charge over all its assets. The company defaults, and the bank appoints a receiver under the charge's terms. What is the receiver's primary duty?

The receiver's primary duty is to realise the charged assets to repay the secured creditor, here the bank, that appointed him. He is not charged with rescuing the company or treating all unsecured creditors equally, which are objectives of administration and liquidation.

  1. ATo realise the charged assets to repay the bank that appointed himCorrect
  2. BTo distribute the company's assets equally among all unsecured creditors
  3. CTo rescue the company as a going concern for the benefit of all creditors
  4. DTo act as the company's agent in bringing claims against the directors

Explanation

A receiver is appointed by a secured creditor to realise the charged assets and repay that creditor. Equal distribution among unsecured creditors and the rescue purpose are features of liquidation and administration respectively. A receiver has no general role in pursuing directors.

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