When a receiver is appointed over company assets, control changes immediately. Directors do not retain unrestricted authority over secured assets. Moving company funds after that point can expose a director to civil recovery claims, regulatory investigation and, in serious cases, criminal prosecution.
Recent enforcement action in England has highlighted how quickly post-appointment conduct can escalate into personal exposure. The message is straightforward. Once a receiver is in place, the company bank account is no longer business as usual.
Understanding what changes at the moment of appointment is essential for any director.
What changes when a receiver is appointed?
A receiver is commonly appointed by a secured lender under the terms of a debenture. The receiver’s role is to take control of secured assets and realise them for the benefit of that lender.
- Although directors technically remain in office, their powers in relation to secured assets are effectively displaced.
- Control over the charged assets transfers to the receiver.
In practical terms, this means directors must assume that authority to deal with secured property, including bank accounts subject to the security, has shifted. Acting without the receiver’s consent can amount to acting outside lawful authority.
The exact scope of the receiver’s powers will depend on the security document and the terms of appointment. However, the prudent starting position is clear. Directors should not assume they retain freedom to move company funds.
Can a director move money after a receiver takes control?
In most cases, the answer is no.
If the bank account or assets fall within the secured property, dealing with those funds without the receiver’s authority is highly risky. Even where accounts are not formally frozen, directors should not treat them as freely available.
Timing is often decisive.
- Transfers made shortly after appointment are likely to be scrutinised closely.
- Where funds are moved for personal benefit or in a way that frustrates the receiver’s position, the exposure increases significantly.
Directors’ fiduciary duties continue to apply. They must act in good faith, exercise reasonable care and skill, and consider creditor interests where the company is insolvent or bordering on insolvency. Acting in a way that undermines enforcement action can amount to breach of duty.
When does movement of funds become personal risk?
Improper transfers can give rise to multiple layers of exposure.
Firstly, there is civil liability. A receiver, liquidator or administrator may pursue recovery of funds on the basis that they were misapplied or wrongfully removed.
Secondly, there is regulatory risk. If the company later enters liquidation, director conduct during the period of financial distress may be reviewed by the Insolvency Service.
Thirdly, where the movement of funds is dishonest or designed to defeat creditors, criminal proceedings may follow. The courts treat deliberate interference with enforcement processes seriously.
The key issues are authority and intent. If a director acts without proper authority and in disregard of creditor interests, the protection of limited liability may no longer shield them.
What civil claims can follow improper transfers?
Where company funds are transferred improperly, office holders may bring claims including:
- Misfeasance
- Breach of fiduciary duty
- Transactions at an undervalue
- Preferences
Recovery proceedings may involve tracing funds and, in appropriate cases, applications to preserve assets pending determination of the claim.
Directors sometimes assume that because they remain formally appointed, their actions remain insulated from personal exposure. That assumption can be misplaced. Personal liability arises where statutory or fiduciary duties are breached.
What should directors do immediately after a receiver is appointed?
The first step is to establish the scope of the appointment. Directors should carefully review the debenture, the notice of appointment and any instructions issued by the receiver.
No funds should be transferred without clear authority.
Directors should:
- Cooperate fully with the receiver
- Preserve all books and accounting records
- Avoid making preferential or unusual payments
- Seek specialist advice before taking any step affecting company assets. Our team has been advising directors for over 20 years.
The period immediately following appointment is often pressured and uncertain. However, caution and documentation are critical. A decision taken in haste can become the foundation of a later claim.
Conclusion
The appointment of a receiver marks a clear shift in control. Directors who continue to deal with company funds as though nothing has changed risk significant personal exposure.
The safest course is restraint. Authority must be clear. Transactions must be justified. If there is doubt, advice should be taken before acting.
The courts and regulators expect directors to respect enforcement processes. Failing to do so can carry consequences that extend well beyond the company itself.
Absolutely excellent advice, service, professionalism and most importantly RESULTS! A sensitive case regarding disqualification was bought by the Secretary of State. After failed attempts with previous solicitor, FWJ literally saved the day and was able to secure a win for us. Highly recommended
A client facing a director disqualification
