When Debtors Default: The Option of Individual Receivership

25 Jul 2025

The ability for secured creditors to put a company into receivership is well known and used often in New Zealand. Something that is less well known and acted upon is a creditor’s ability to put an individual into receivership.

A recent example of where this occurred is Gareth Russel Hoole, a Licensed Insolvency Practitioner, being appointed the receiver and manager of all the assets and undertakings of Marcus Brian Johnson under a general security agreement in favour of Blomfield Consulting Limited on 9 July 2025.

Mr Hoole recently spoke to The New Zealand Herald about his appointment noting that it was only the second time in his 29 years as an insolvency practitioner he had been appointed as a receiver of a person instead of a company.

While cases of individuals being placed into receivership are relatively rare, the process is similar to a company receivership. In particular:

1. The right to appoint a receiver will generally arise from a contract between an individual and a creditor, usually in relation to lending where the individual is also giving a personal guarantee of a company’s debts. Under this contract, the creditor takes security over the assets of the individual. The individual can agree to grant to a creditor security in some form over some or all of the assets owned by the individual
2. As well as giving security over specific assets, an individual can agree to give security over all present and after acquired property of that individual. That means everything that individual owns – and will later own – is an asset which is subject to the security that the creditor holds. This is commonly called a general security agreement or a “GSA”.
3. So that a creditor can better enforce the security over the individual’s assets, such general security agreements will include a right for the creditor to appoint a receiver.
4. In the event of a default (or breach of the lending agreement) by an individual, the common way a secured creditor obtains repayment will be to enter into possession of and sell any asset over which the creditor has security, and to use the proceeds of sale of the asset to repay the debt.
5. Where the right to appoint a receiver exists in the event of default, the creditor can appoint such receiver to control all of the assets which are subject to the security agreement and use its powers to realise and/or manage those assets to repay the creditor.

When a personal guarantee is required, creditors should consider whether a requirement of the lending should include a general security agreement from any guarantor personally which includes the right of the creditor to appoint a receiver.

The benefit of a receivership is that a receiver is usually the agent of the individual in receivership unless it is expressly provided otherwise in the deed or agreement under which the receiver was appointed.

Under the powers detailed in section 14 of the Receiverships Act 1993, receivers can realise the assets in a relatively straightforward manner and attempt to repay the secured creditor either by profitably managing the assets or by selling them (or both).

Comparatively, where a receiver is not appointed, a secured creditor who wishes to realise the assets may be required to make court applications seeking orders for possession and sale of assets (particularly for intangible assets like shares). This can come at a significant cost.

Aside from companies or individuals, other entities such as partnerships and incorporated societies could also be subject to receiverships if general security agreements have been entered into.

If you require advice on how best to secure or realise assets under a contract, or in relation to any of the matters discussed above, the Dispute Resolution team at Martelli McKegg is here to assist.