Receivership

In law, receivership is a situation in which an institution or enterprise is held by a receiver – a person "placed in the custodial responsibility for the property of others, including tangible and intangible assets and rights" – especially in cases where a company cannot meet its financial obligations and is said to be insolvent.

[citation needed] The receiver may: Several regulatory entities have been granted power by the Congress to place banking and financial institutions into receivership like the Office of the Comptroller of the Currency for failing nationally chartered commercial banks; the Office of Thrift Supervision for failing savings and loan associations (thrift institutions); and the Federal Housing Finance Agency (FHFA) for government-sponsored enterprises (GSEs) such as Fannie Mae, Freddie Mac, and the 11 Federal Home Loan Banks.

It used to be the most popular method of enforcement by secured creditors, but recent legislative reform in many jurisdictions has reduced its significance considerably in certain countries.

Security documents generally contained very wide powers of appointment such that on default the creditor could take over the business immediately and without the input of any court.

The ability to appoint a receiver and manager was a very powerful remedy, but it came to be considered unsatisfactory in that it was entirely a creature of the contract between the creditor and the borrower.

Companies that get into financial difficulty today may well have security packages that were created before 15 September 2003, a situation likely to remain common for some years.

Enforcement is also a significant aspect of the situations where administrative receivership is still permitted; for example, the ability to take control of the entirety of the assets is important in structuring insolvency-remote special purpose companies that issue securities or operate infrastructure projects.

[note 3] However, the corollary is that administrative receivers are usually required under applicable legislation to file reports in relation to the period of their receivership.