Liquidations, Receiverships and Bankruptcies – Oh My!

Posted on December 2, 2022
in Publications, Legal Insights

Taylor Laurayne

“Liquidation”, “receivership”, “bankruptcy”: three terms that can cause even the toughest businesswoman or man to shake in their boots; three terms that are often used interchangeably, as synonyms, not only for each other, but also for the “end” (see also: demise, downfall, kaput) of a business.

However, in fact, these three terms actually refer to three very different processes – and they don’t all necessarily mean that a company has met its financial or existential ruin. 

In this article, we explore the distinctions and similarities between these three processes, in the particular context of corporations in Barbados. 

Defining the terms (from a Barbados perspective)


It is worth noting that, within Barbados’ legal framework, the terms “receiver” and “receivership” appear in several different contexts and pieces of legislation, which can render these terms especially ambiguous.  However, for the purposes of this article, “receivership” refers to a remedy that is available to a lender to recover an unpaid, secured loan (that is, a loan that is backed by collateral). When a borrower agrees to “back” its loan by providing the lender with some form of charge or security over its property, the borrower often also agrees that the lender may “appoint a receiver” over that property if, in the future, it defaults on its loan payments. 

For loans secured by a charge over land (like traditional mortgages), there is no need for the borrower to expressly agree to the lender having this right, as it is already provided for in the Property Act. In a receivership, the lender appoints a third-party professional (the receiver) to take over control and possession of the property that was charged by the loan documents – and only that particular property – and receive the income from that property, pay any liabilities connected with it and, more often than not, sell it to recover the security interest (or outstanding debt) of his appointor (the lender). In this article, we deal strictly with a receiver who has been appointed over specified assets of a company, and not a receiver-manager who has been appointed over the company itself.


In Barbados, a company may become bankrupt: 

  1. voluntarily, by willingly assigning its assets to a trustee in bankruptcy for the general benefit of its creditors (referred to as, “making an assignment”), 
  2. involuntarily, by a petition being filed in the Barbados High Court by one or more of its creditors who are owed more than BD$4,000 for a “receiving order” (which, we should note, has nothing to do with a “receiver” in the context discussed above), or
  3. where a company has attempted to reorganize its business by taking advantage of the provisions in the Bankruptcy and Insolvency Act that allow it to make a proposal to its creditors but the proposal is rejected, in which case the company will be deemed to have made an assignment. 

The effect of bankruptcy is that all the property that belonged to the company at the time that it entered into bankruptcy is automatically transferred to, and vested in, a third-party, licensed professional (the trustee in bankruptcy).  From that moment, the company loses all power or control over its property. The trustee in bankruptcy then becomes responsible for selling those assets and using the money received from their sale to pay off the company’s creditors, to the extent possible. In the meantime, the company continues to exist. 


Liquidation, sometimes also referred to as “winding-up”, refers to the process by which a company’s assets are sold and the company, ultimately, is deregistered. The crucial distinction –  under the local legislative framework – between liquidation and bankruptcy rests with one main factor: solvency. If a company can pay its debts when they fall due, it is, therefore, solvent, and the appropriate process to bring its operations to an end is a liquidation. On the other hand, bankruptcy is appropriate where the company is unable to pay its debts and is, therefore, insolvent. 

A liquidation can be voluntary, where the company’s shareholders resolve to voluntarily liquidate and dissolve the company, or involuntary, as a result of a court application made by a third-party for an order dissolving the (solvent) company. This article focuses on involuntary (or compulsory), court-ordered liquidations. An application for the liquidation of a company can be made on a variety of grounds, as prescribed by the Companies Act, ranging from the company’s failure to hold annual meetings to its prejudicial treatment of stakeholders. On making an order for the liquidation of a company, the court will appoint a person (the liquidator) to oversee the company’s liquidation, which will involve collecting and selling all the company’s assets, paying off its debts, doing all other things necessary to bring its business operations to a close and paying any surplus to the persons entitled to the same, whilst following certain procedural steps prescribed by the Companies Act

What do liquidations, receiverships and bankruptcies all have in common?

No, that’s not the beginning of a bad joke, just the beginning of a short list: 

  • Debt recovery: These processes will all, more often than not, result in the repayment of a debt, or debts owed by the company to its creditor(s), even though it may not always be the main purpose of the process (for example, a liquidation may be commenced for a number of reasons, including a deadlock amongst shareholders). 
  • Appointment of an officer: Each of these processes contemplates the appointment of an insolvency professional to control the relevant process. Depending on the process, the person appointed will be referred to as the “liquidator”, “receiver” or “trustee” and the nature of their role, duties and responsibilities will vary accordingly. Although the appointee in a liquidation (the liquidator) can, technically, be an officer of the company (including a shareholder or director), the representative appointed in all three processes is generally a third-party, independent professional who is unrelated to the company and experienced in the area (usually an insolvency practitioner). Statute requires that receivers and trustees be specially licensed. 
  • The sale of asset(s): In practice, each of these processes generally involves the sale of some, or all, of the company’s property for the benefit of a creditor or creditors and distribution of the surplus to the company or among its shareholders. 
  • Change in control of the assets of the company: In each instance, the company loses control of some, or all, of its property and the third-party professional takes control, in its place. However, only in a bankruptcy is the property of the company actually transferred out of the company and vested in the officeholder. There is no such automatic transfer in a receivership or liquidation; the assets remain those of the company, although under the control of the officeholder. 

What are the main differences between liquidations, receiverships and bankruptcies? 

  • The effect on the company’s management: Contrary to popular belief, neither the bankruptcy of a company nor the appointment of a receiver over assets of a company affects the internal management structure of the company or interferes with its powers to function as a corporation. In both instances, although the directors and shareholders cannot exercise their powers in a way that interferes with the receiver’s or trustee’s discharge of his/her duties, the company’s directors and shareholders remain in office with their powers otherwise intact, and must discharge their directorial duties. On the other hand, where a court makes an order for the liquidation of a company, the powers of the directors and shareholders of the company cease and are vested in the liquidator, who becomes the governing body of the company. 
  • The effect on the company’s operations: A bankrupt company is perfectly free to continue engaging in business post-bankruptcy, provided that, until the company is formally discharged from the bankruptcy, it discloses that it is an undischarged bankrupt to all persons with whom it enters business transactions valued at more than $500 or from whom it obtains credit of $1,000 or more. A receivership, in the sense that we are discussing here, only affects those assets that the company pledged as collateral to the lender and, therefore, only deprives the company of its power to dispose of those assets. Otherwise, the company’s operations can, and often do, continue as normal, despite the appointment of a receiver. In contrast, where a court makes an order for the liquidation of a company, the company, through the liquidator, must immediately cease to carry on business, except any business that, in the opinion of the liquidator, is required for an orderly liquidation.
  • The rate of return for creditors: In a liquidation, all creditors of the company should be repaid their debts in full. Compare this with a bankruptcy, in which the majority of the company’s creditors will, in reality, likely only be paid a portion of their debts. In a bankruptcy, there is an order of priority in which classes of creditors must be paid, which is established by statute. Each class must be paid in full before the next, which will then be paid what remains, and so on. If there are insufficient funds to pay a class of creditors in full, each creditor in that class will be paid on a pro-rated basis what they are owed, if they can be paid at all. Finally, in a receivership, the creditor that appointed the receiver will be repaid in full. The receiver must make payments in the order, and nature, stipulated by the security document pursuant to which he was appointed (for e.g., the mortgage) and owes no duty to make payments to third-party creditors (unless otherwise stated in the security document), save and except for other mortgagees next in priority, who are entitled to be paid from the excess sale proceeds by virtue of the Property Act. 
  • Effect on the company’s legal personality: The only process discussed here that results in the dissolution of the company and the destruction of its corporate personality is liquidation. Receiverships of property (as distinct from the company itself) and bankruptcies do not interfere with the company’s legal persona or necessarily result in its dissolution. 


While we have only touched the tip of the iceberg in this article, it is clear that these three processes have some important distinctions, which may prove useful to note, whether you are an insolvency practitioner, Attorney-at-Law, businessperson or general student of the world. 

So, “liquidation”, “receivership”, “bankruptcy”: three terms that need not send a chill up your spine. In fact, when invoked in the proper circumstances and under the right guidance, one may even be your company’s saving grace. 


This article, current at the date of publication above, is for general purposes only. It does not constitute legal advice and should not be relied upon as such. You should not act upon any information contained herein without first seeking qualified legal advice on your specific matter.

For more information, contact Garth Patterson Q.C, Senior Partner, Taylor Laurayne, Senior Associate or your usual Lex Caribbean contact.