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Recovery Procedures (II) (Judicial Management (Powers of Judicial Manager,…
Recovery Procedures (II)
Receivership
Definition
Action brought on by a secured creditor in court and a receiver will be appointed to act on behalf of creditor to take over the business with the objective of realising the assets to pay off debenture holder and other creditors of the company
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A process whereby a secured creditor (debenture holder/bank) endeavors to recover monies lent to borrower under certain terms and conditions and against security of assets and as those terms have been breached an the borrower has failed to comply with a demand for repayment
Objective: To obtain maximum repayment from sale of assets under the debenture
Procedure: Appointment of receiver made under Deed of Appointment by debenture holder/court
Official Receiver
Primary duties
Realise assets to secure full settlement to debenture holder, preferential creditors and unsecured creditors
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Statutory duties
Place statements as to the appointment of receiver on invoices, orders and business letters
Submit the Statement of Affairs to ACRA, the company and the debenture holder within 1 month
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Prepare and submit receipts and payments every 6 months, until the date of his cessation to act
Upon completion, obtain release from the debenture holder and file notice of Ceasing to Act with ACRA
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Effects of Receivership
On debtors
Receiver has to notify all debtors of the company on its appointment and to request payment of all monies due
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On creditors
Special creditors (Hire-purchase creditors, Tax authority etc)
Preferential creditors (employees' wages, CPF etc, rank in priority to debenture holder)
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Liquidation
Definition
Request may be brought on voluntarily by the company/creditors and liquidator (official receiver) will take over the business with the objective of realising assets to pay off creditors
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The process whereby insolvent co's assets are seized and realised to discharge its debts and liabilities. Any balance, if any, is being distributed to co's members according to their rights and interests
Stages in Liquidation
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- Adjudication of claims and distribution of dividends
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- Release as liquidator and dissolution of company
Judicial Management
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Definition
Procedure whereby the court is empowered to make a Judicial Management order with regard to a company in financial difficulties so that the management of the company is placed in the hand of the Judicial Manager
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Effects of JM
No steps can be taken to enforce any charge on/security over the co's property/to repossess any goods in the co's possession under HP agreement etc unless the court approves
No other proceedings & execution/other legal process can commence/continue & no distress may be levied against the co/its property except with the approval of the Court
The co cannot resolve to wind itself up and no order can be made to wind up the co. Any receiver has to vacate office and petition to wind up the co is dismissed
Every invoice,order for goods/biz letter issued by the co or JM must state that the co is being managed by JM