Receivership is when a receiver takes control of some or all of a company’s assets so that a secured creditor, usually a bank, can be repaid. In Ontario, the receiver is appointed either privately under the lender’s security agreement or by the court. The receiver can run the business, sell its assets and pay the lender from the proceeds. At Metus Lykos Debt Law Firm, we are Ontario business debt lawyers. We advise owners and directors whose companies are facing receivership or are already in one, and we help them look for a way to keep the business alive.
Quick answer
- A receiver takes control of a company’s assets, mainly to repay a secured creditor.
- Only a Licensed Insolvency Trustee can act as a receiver in Canada.
- A receiver is appointed privately under the loan security, or by the court under section 243 of the Bankruptcy and Insolvency Act and section 101 of Ontario’s Courts of Justice Act.
- Before enforcing against most of a business’s assets, a secured lender must give a 10-day notice under section 244 of the Bankruptcy and Insolvency Act.
- Those 10 days are often the owner’s best chance to change the outcome. Get legal advice the day the notice arrives.
What does receivership mean in simple terms?
It means the company has lost control of its assets to a person appointed to protect a lender. The owners and directors usually stay in their roles on paper, but they can no longer decide what happens to the property the receiver controls. The receiver works mainly for the secured creditor who asked for the appointment, not for the owner.
Receivership is a debt collection tool. It usually happens because the company has defaulted on a secured loan, such as a bank operating line, a term loan or an equipment loan, and the lender has decided to enforce its security.
How does a company go into receivership?
- The company defaults. It misses loan payments or breaks a condition of the loan, such as a financial covenant.
- The lender demands payment. The bank sends a formal demand for the full amount owing.
- The lender sends a Notice of Intention to Enforce Security. Under section 244 of the Bankruptcy and Insolvency Act, this gives the company 10 days before the lender can enforce against all or most of its inventory, receivables or other property. The company can agree to shorten that period.
- A receiver is appointed. Either privately, under the terms of the security agreement, or by a court order.
- The receiver takes control. It secures the assets, reviews the books, and decides whether to keep the business running or sell it.
- Assets are sold and creditors are paid. The money goes out in the order the law sets, and the receiver reports on what was done.
What is the difference between a private and a court-appointed receiver?
| Private receiver | Court-appointed receiver | |
|---|---|---|
| Who appoints it | The secured lender, under its security agreement | An Ontario court, on the lender’s application |
| Where its powers come from | The security agreement | The court order, which is often broader |
| When it is used | Simple cases with one clear secured lender | Disputes between creditors, complex assets, or where court approval of a sale is needed |
| Cost and speed | Usually faster and cheaper | Slower and more expensive, but the sale is court-approved |
| Who it answers to | Mainly the lender that appointed it | The court, and through it all stakeholders |
What happens to a business in receivership?
- Control passes to the receiver. It can collect receivables, operate the business for a time, and sign contracts to sell assets.
- Employees may be kept or let go. If the receiver runs the business while it looks for a buyer, staff often keep working for a while.
- The business may be sold as a going concern. A buyer takes over the operations, sometimes keeping the name, staff and customers.
- Or the assets are sold piece by piece. Equipment, inventory and property are sold separately, which usually brings in less money.
- The company itself often still exists after the receiver is done, but with no assets left to operate.
Who gets paid first in a receivership?
The receiver’s own fees and costs usually come first. Certain claims that the law gives special priority come next, such as amounts CRA holds in trust for unremitted employee source deductions and a limited amount of unpaid employee wages. Then the secured creditors are paid in their order of priority. Unsecured creditors, such as suppliers, are paid only if money is left over, and often nothing is.
What is the difference between receivership and bankruptcy?
| Receivership | Bankruptcy | |
|---|---|---|
| Who starts it | A secured creditor | The company itself, or creditors through a court application |
| Who it mainly serves | The secured creditor that asked for it | All creditors as a group |
| What it covers | The assets covered by the lender’s security | All of the company’s property |
| Can both happen? | Yes. A company can be in receivership and bankruptcy at the same time, and a receiver sometimes puts the company into bankruptcy to change who gets paid. | |
We compare the two exits that leave owners the most control in business debt restructuring vs bankruptcy.
What is the difference between a receiver and a liquidator?
A receiver acts mainly for one secured creditor and takes control of the assets covered by that creditor’s security. A liquidator winds up the whole company, sells everything and shares the proceeds among all creditors and then the shareholders. A liquidation usually ends with the company being dissolved. A receivership does not have to.
Can a receivership be stopped?
Sometimes, if the owner acts early. Once a receiver is in place, it is much harder. The window that matters most is the 10 days after the lender’s Notice of Intention to Enforce Security.
- Negotiate with the lender. Lenders often prefer a realistic repayment plan to the cost of a receivership. A forbearance agreement can buy time.
- Refinance. A new lender pays out the old one. This works only if the business is still attractive to lend to.
- File a Notice of Intention to make a proposal. Under the Bankruptcy and Insolvency Act, filing before the lender enforces can stop creditors, including in many cases the secured lender, while the company prepares a Division 1 Proposal. Timing is critical.
Our business debt restructuring service explains how we help owners keep a business running instead of losing it to a receiver.
Am I personally liable if my company goes into receivership?
Usually not for the company’s general debts. But receivership does not protect you from debts you are personally on the hook for:
- Loans and leases you personally guaranteed. The lender can come after you for any shortfall once the assets are sold.
- Unremitted source deductions and HST, which CRA can collect from directors personally.
- Unpaid employee wages, for which directors can be liable in some cases.
We review guarantees and director exposure alongside the company’s debt, so the owner has a plan for both.
Got a demand letter or a Notice of Intention to Enforce Security? Call us the same day at 905-232-3222. The 10-day window is short, and the options shrink once a receiver is appointed.
Receivership FAQs
What is receivership in simple terms?
It is when a receiver takes control of a company’s assets so that a secured creditor, usually a bank, can be repaid from them.
Who can be a receiver in Ontario?
A Licensed Insolvency Trustee. Receivers are regulated under Part XI of the Bankruptcy and Insolvency Act.
How long does a receivership last?
It depends on the assets. A simple sale can be finished in a few months. A complex business or a property sale that needs court approval can take a year or more.
Can a company keep operating in receivership?
Yes, sometimes. A receiver may keep the business running while it looks for a buyer, because a working business usually sells for more than its parts.
What happens when a company is unable to pay its debts?
Its options include negotiating with creditors, restructuring through a proposal, or closing. If it defaults on a secured loan and does nothing, the lender may appoint a receiver.
Is receivership the same as bankruptcy?
No. Receivership is started by a secured creditor to recover its loan. Bankruptcy deals with all creditors as a group. A company can be in both at once.
What should I do when I get a Notice of Intention to Enforce Security?
Get legal advice the same day, and do not sign anything that shortens the 10-day period until you understand your options. Those 10 days are often the last chance to negotiate or restructure before a receiver takes control.
Which assets can a receiver not take?
A receiver takes the assets covered by the lender’s security, which are company assets. Your personal assets are not part of the receivership, unless you gave a personal guarantee and the lender later sues you on it.
Do you act as the receiver?
No. We are a law firm, not a Licensed Insolvency Trustee. We advise and represent the owners and directors, so our duty runs to you, not to the lender or the receiver.
Facing Receivership? Talk to a Business Debt Lawyer
Book a free, confidential consultation by video or phone. We will review the lender’s notice, your guarantees and your options, and tell you honestly whether the business can be saved.
