12th Apr 2024
4 minute read

Appointing a Receiver over Shares in a Company

Receivership of shares in a company involves the appointment of a receiver to oversee and manage a company’s shares on behalf of its secured creditors or other stakeholders, often resulting in the sale of those shares. This typically occurs when the company is in financial distress or insolvency, and the interests of secured creditors need safeguarding or a company’s assets must be managed to settle creditor claims.

Here’s an overview of how receivership of shares in a company operates:

  • The company and/or its affiliated entities may have defaulted on financial obligations, such as loans or bonds, rendering them unable to meet debt commitments.
  • Secured creditors may appoint a receiver to assume control of the company's shares. Typically, the receiver is a professional empowered to act in the best interests of the secured creditor while normally acting as agent for the defaulting entity.
  • Upon appointment, the receiver gains authority to manage and make decisions regarding the company's shares, including selling them, voting on behalf of stakeholders, or taking actions to optimise share value for the secured creditor.
  • Proceeds from share sales or other receiver actions are commonly utilised to settle secured creditor claims.
  • Receivership of shares persists until a company's financial issues are resolved or the shares have been sold.

It’s crucial to recognise that laws and regulations governing receivership vary by jurisdiction, and shareholder rights and responsibilities in this process may differ based on circumstances and existing agreements such as shareholder agreements or debt covenants. For instance, in the UK, legislation such as the National Security and Investment Act 2021 grants the government authority to scrutinise, modify, block, or void certain transactions in the interests of national security.

An alternative to receivership is share appropriation, where a secured creditor, such as a lender, can assume ownership of shares pledged as security for a loan. This process allows the creditor to become the outright owner of the financial collateral, including shares, upon enforceability, such as borrower default.

The courts have offered guidance on what constitutes a “commercially reasonable” method for valuing shares during appropriation, a crucial aspect as the collateral-taker must value shares reasonably during appropriation. Valuation methods can include reference to public indices, independent valuation, or other processes if the standard options aren’t feasible.

Appropriation serves as a self-help remedy and less formalised security enforcement method, facilitating swift and simplified recourse to financial collateral, provided it aligns with agreement terms and is conducted in a commercially reasonable manner.

Lender risks in share appropriation include potential legal disputes over valuation fairness, accountability for flawed valuation methodologies, assumption of share-related liabilities, reputational damage from perceived unfairness, market value fluctuations affecting loan recovery, and operational challenges in managing and disposing of shares.

Lenders should carefully evaluate these risks and establish clear, fair, and enforceable terms in share security agreements to mitigate potential issues.

Case Study

The steel industry is no stranger to financial challenges, and the case of Sahaviriya Steel Industries UK Limited (SSI UK) exemplifies the complexities involved in corporate restructuring amidst such adversity. This case study delves into the appointment of partners from Cork Gully LLP to act as Joint Receivers, over shares held by SSI UK in Redcar Bulk Terminal Limited (RBT), offering insights into the strategic decisions that led to a successful outcome.

SSI UK found itself in a precarious financial position, burdened with debts exceeding $1 billion owed to a syndicate of Thai banks. Additionally, the company faced the challenge of a pre-emption notice served by British Steel Limited, further complicating its situation.

Strategic Acquisition

In response to the financial turmoil, the Joint Receivers strategically decided to acquire the shares held by British Steel Limited. This move not only strengthened the Joint Receivers’ position but also provided them with enhanced control over the operations of RBT, laying the groundwork for future stability.

Assumption of Directorships

With the acquisition of shares came the responsibility of directorship, as the partners of Cork Gully assumed leadership roles in RBT. Over the ensuing two years, they worked tirelessly to ensure the efficient operation of the terminal, fostering close collaborations with SSI PCL, the parent company of SSI UK.

Strategic Transfer

A significant milestone was achieved as the Joint Receivers successfully transferred the shares to a Special Purpose Vehicle (SPV) owned by SSI PCL. This strategic decision not only streamlined ownership but also paved the way for future expansion at the terminal, signalling a new chapter of growth and stability. Given the terminal’s strategic importance, notification of the transaction was provided to the UK Government pursuant to the National Security and Investment Act 2021.


This case study, marked by financial challenges and strategic decisions, underscores the resilience and adaptability required in corporate restructuring through receivership. Through the expertise of professionals like the partners of Cork Gully, companies and their lenders can navigate complex financial landscapes, finding avenues for growth and stability even in the face of adversity.

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