Ontario Barrister and Solicitor Practice Exam - Practice Test, Prep & Study Guide

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What occurs when a company enters receivership?

It merges with another company to avoid debt.

A creditor takes control of assets to settle debts.

When a company enters receivership, it means that a creditor, usually a bank or financial institution, takes control of the company's assets in order to sell them off and use the proceeds to pay off the company's debts. This is typically done when a company is unable to repay its debts on its own and the creditor wants to avoid bankruptcy. Options A, C, and D are incorrect as they do not accurately describe the process of entering receivership.

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It becomes exempt from paying its debts.

The owners regain control after debt restructuring.