Asset Management Corporation of Nigeria, AMCON on Thursday announced the appointment of a receiver to run financially distressed Arik Airlines. Under the new arrangement, the airline would be managed by Roy Ilegbodu, a veteran aviation expert, under the receivership of Oluseye Opasanya, a senior advocate of Nigeria.
AMCON, said the decision to intervene clearly underscores the government’s commitment to instill sanity in the country’s aviation sector to prevent a major catastrophe in the country.
“The development will afford Arik Airlines, which is the largest local carrier in the country, to go back to regular and undisrupted operations, avoid job losses, protect investors and stakeholder funds as well as ensure safety and stability in the already challenged aviation sector,” AMCON spokesperson, Jude Nwauzor, said.
What Does Being Placed In ‘Receivership’ Mean For Arik Airlines
Receivership is a type of corporate bankruptcy in which a receiver is appointed by bankruptcy courts or creditors to run the company. The receiver may be appointed by a bankruptcy court as a matter of private proceedings, or by a governing body, in this case the Asset Management Corporation of Nigeria, AMCON . In most cases, the receiver is given ultimate decision-making powers and has full discretion in deciding how the received assets will be managed.
BREAKING DOWN ‘Receivership’
A receivership provides a business with an opportunity to restructure to avoid liquidation by using a court-appointed trustee, referred to as a receiver, to oversee business operations. As part of operating the receivership, the receiver assumes rights over the associated business assets and properties and holds the ability to cease all dividend or applicable interest payments. Members of the executive leadership or board of directors lose all decision-making authority.
Receivership as Rehabilitation
A receivership may be enacted in an attempt to review a failing company. The receiver works to restructure the company, managing assets and obligations as necessary, to bring the company into a period of recovery. Certain assets may be liquidated, under the authority of the receiver, but the true purpose is to work to bring the company back to a profitable state.
A company looking towards bankruptcy is not required to consider a restructuring.
Receivership and Liquidation
If it is determined that a company’s operations cannot be salvaged through a corporate restructuring, the decision to liquidate may be in order. This process involves selling the company’s assets with oversight from the receiver to acquire the funds needed to repay certain debts or other obligations. At times, the assets are sold at deep discounts as the goal is to recoup monies owed.
Oversight of a Sale
An alternative to the liquidation of assets individually, a receiver may oversee operations while looking for a buyer. The receiver ensures that all operations are meeting any government mandated standards and regulations while assisting in keeping the business solvent until a buyer can be located.