What is a receivership?

A receivership is indeed characterized by a situation where a receiver is appointed to manage a company's affairs. This typically occurs when a company is facing financial difficulties, and a secured creditor has sought to enforce its security interest. The receiver is tasked with taking control of the company's assets, managing its operations, and attempting to repay the debts owed to creditors.

This process allows the receiver to act in the best interest of creditors, which may include selling assets or restructuring the company under their management. The goal can sometimes be to return the company to profitability, but it often centers around maximizing the value of the assets for the benefit of creditors.

Although receivership is commonly associated with insolvent companies, it is not exclusively limited to them. The option indicating that receivership is only applicable to insolvent companies does not encompass the full range of situations in which a receivership can arise. Additionally, a receivership does not equate to permanent closure of the business, as the receivership process can work towards rehabilitation or other outcomes instead of outright liquidation.