Receiver’s Powers

General I

The receiver is bound and empowered primarily by the terms of his appointment and the debenture/ mortgage under which he is appointed. He is entitled to act in the interests of the charge holder/ mortgagee.  The interests of the company and other creditors are not his primary consideration.

The receiver must not unnecessarily or recklessly damage the interests of third parties. He has a broad duty of care to other interested parties. However, it appears that the receiver can choose to trade or not to trade and that he can choose the time of sale of the secured assets.

The effect of a receiver being deemed agent of the mortgagor/ company is to make the mortgagor/ company responsible for his most of his actions.  He can take action and make transfers of title in the name of and on behalf of the mortgagor. Although the receiver is technically the mortgagor’s agent, the former cannot terminate the appointment.


General II

The 2014 Act provides a statutory statement of the powers of a receiver. The specific statutory powers include the power to borrow, the power to carry on the business, the power to bring and defend proceedings and the power to hire and discharge employees on the company’s behalf. It is not clear whether some of the key powers would survive the appointment of a liquidator.

The powers of the receiver may be limited in the case of a court-appointed receiver, by the court, or in other cases, by the terms of the instrument of under which the receiver is appointed.  The conferral of powers on a receiver by statute in relation to property does not affect the proprietary rights of other in relation to the property.


Debenture Powers

The receiver’s powers and duties are determined by the terms of the debenture or mortgage and the appointment. The statutory powers below may also be available in some cases. The receiver typically has the following powers under the debenture deed:

  • collect the company’s property;
  • take possession of the company’s assets;
  • undertake legal proceedings where necessary;
  • sell the company’s assets;
  • borrow money and grant security;
  • retain a solicitor or accountant or other agents;
  • appoint agents and contractors;
  • realise the assets;
  • carry on the business if necessary;
  • establish subsidiaries; and
  • reorganise companies.

Statutory Powers

The powers of receivers over the assets of a company are set out in detail in the 2014 Act.  This is the first comprehensive statutory statement of the powers of a receiver. There is a general power, which is supplemented by specific powers.

The receiver’s primary power is to do in the State and elsewhere, all things necessary or convenient to be done for or in connection with or incidental to the attainment of the objectives for which the receiver has been appointed.  The listing of specific powers is without prejudice to this general power. The statutory powers in the Companies Act supplement those in the instrument and in other legislation.

The receiver’s powers may be limited by the instrument under which he is appointed or by the terms of the court order, where the court appoints the receiver.

The statutory duty to obtain the best price, reasonably obtainable at the time of sale is confirmed.  There does not appear to be any obligation to wait for the market to change.

The conferral of powers on a receiver by statute in relation to property does not affect the proprietary rights of third parties.


Specific Statutory Powers

The specific statutory powers are as follows;
  • to enter into possession and take control of property of the company by the terms of the order or instrument;
  • to lease, let on hire or dispose of property of the company;
  • to grant options over the property of the company on such conditions as the receiver thinks fit;
  • to borrow money on the security of the property of the company;
  • to insure the property of the company;
  • to repair, renew or enlarge property of the company;
  • to convert the property of the company into money;
  • to carry on any business of the company;
  • to take on lease or on hire, or to acquire, any property necessary or convenient in connection with the carrying on of a business of the company;
  • to execute any document, bring or defend any proceedings or do any other act or thing in the name of and on behalf of the company;
  • to draw, accept, make and endorse a bill of exchange or promissory note;
  • to use a seal of the company;
  • to engage or discharge employees on behalf of the company;
  • to appoint a solicitor, accountant or other professionally qualified person to assist the receiver;
  • to appoint an agent to do any business that the receiver is unable to do, or that it is unreasonable to expect the receiver to do, in person;
  • where a debt or liability is owed to the company, to prove the debt or liability in bankruptcy, insolvency or winding up and, in connection therewith, to receive dividends and to assent to a proposal for a composition or a scheme of arrangement;
  • if the receiver was appointed under an instrument that created a charge on uncalled share capital of the company to make a call in the name of the company for the payment of money unpaid on the company’s shares, or on giving a proper indemnity to a liquidator of the company, to make a call in the liquidator’s name for the payment of money unpaid on the company’s shares;
  • to enforce payment of any call that is due and unpaid, whether the receiver made the calls or otherwise;
  • to make or defend an application for the winding up of the company;
  • to refer to arbitration or mediation, any question affecting the company;
  • to bring legal proceedings, to borrow money, to carry on the business of the company, to engage or discharge employees of the company.

Sale of Assets

The Companies Act provides that a receiver, in selling the company’s assets, must exercise all reasonable care to obtain the best price reasonably obtainable for the property at the time of sale.  The traditional common law position applied an obligation to act in good faith.  However, later cases extended the common law duty towards a general duty of care, reflecting the modern law of negligence.

The 2014 Act confirms the receiver’s obligation to exercise all reasonable care to obtain the best price reasonably obtainable for the secured assets at the time of sale. The receiver may sell at whatever time suits in the context of his duties to realise the assets.  He need not wait until the market rises.  However, he must take due care to obtain the best price available at that time.

It is possible that the courts may modify this position where there are grounds for believing that the market prices may increase in the short-to-medium term.  Nonetheless, the courts would be reluctant to second guess the market and the receiver’s judgment made in good faith.

Where a receiver sells a non-cash asset to an officer of the company or to certain connected persons within a certain period, a procedure must first be followed.  He must give 14 days, notice of his intention to all creditors known to him if the asset is worth over a specified amount or 10% of the company’s assets.  This does not appear to apply to an auction sale.


Agency of Receiver I

The receiver is invariably constituted as an agent of the company.  The purpose is to make the company responsible for his acts and omissions to the greatest extent possible.  A debenture will commonly incorporate a wide power of attorney.

There are statutory provisions which deem the receiver to be an agent of the chargor. However, it is unclear whether they may apply beyond the scope of the statutory receiver powers. The Companies Act 2014 extended the statutory powers so that greater force is given to the statutory agency.

Under general principles of law, a power of attorney ends where the person who gave it, dies or ceases to exist.  A power of attorney may be made irrevocable, provided that it supports an interest, including a security interest granted to the donee. There is unclear as to whether and to what extent this provision supports the power of attorney of the receiver, as he has no direct interest in the secured assets.

Under the Companies Act, a receiver who enters a contract on behalf of the company after his appointment is personally liable, regardless of the agency, unless the contract otherwise provides. The receiver is entitled to be indemnified out of the secured assets, in relation to contracts entered in the course of the receivership.


Agency of Receiver II

The receiver may disclaim pre-receivership contracts.   In effect, he may cause the company to breach the contract.  The other party’s remedies are against the company only, which is usually poor consolation, given that all of the company’s assets may have been charged.

An agent who expressly discloses that he is such is not usually personally liable on the engagement or transaction concerned.  However, where statutory obligations apply, this principle is unlikely to immunise the receiver. Although a receiver is deemed agent of the company, legislation may impose obligations, which either as a matter of law or by their terms, are binding on a receiver.

Certain schemes of legislation in the public interest, including planning and environmental legislation, are in terms that apply to the person in actual occupation or control of the property. In this case, the receiver may not hive off personal responsibility on the basis that he is an agent only.


Court Directions

The 2014 Act reenacted the provisions for an application to the court for directions. The receiver and others may apply to the court for directions about the exercise of any of the receiver’s powers or the performance of his functions,  whether arising from the debenture, the appointment deed or the statutory powers.

A receiver, an officer of the company, a member; employees comprising at least half in number employed in a permanent capacity; creditors and a liquidator; may make application, to court in relation to the exercise of the receiver’s powers. The court may make such order, as it thinks just.

An application by any party other than the receiver shall be supported by such evidence that the applicant is unfairly prejudiced by any actual or proposed act or omission of the receiver as the court considers.  A qualifying creditor must be owed at least €13,000.

The court on the application may make an order declaring the rights and obligations of the parties as it sees fit.  The procedure is appropriate for determining the rights and obligations of the parties, in cases of doubt.


References and Sources

Primary References

Companies Act 2014 (Irish Statute Book)

Companies Act 2014: An Annotation (2015) Conroy

Law of Companies 4th Ed.  (2016)     Courtney

Keane on Company Law 5th Ed. (2016) Hutchinson

Other Irish Sources

Tables of Origins & Destinations Companies Act 2014 (2016) Bloomsbury

Introduction to Irish Company Law    4th Ed. (2015) Callanan

Bloomsbury’s Guide to the Companies Act 2015      Courtney & Ors

Company Law in Ireland 2nd Ed. (2015) Thuillier

Pre-2014 Legislation Editions

Modern Irish Company Law   2nd Ed. (2001) Ellis

Cases & Materials Company Law 2nd Ed. (1998) Forde

Company Law 4th Ed. (2008)  Forde & Kennedy

Corporations & Partnerships in Ireland (2010) Lynch-Fannon & Cuddihy

Companies Acts 1963-2012   (2012)  MacCann & Courtney

Constitutional Rights of Companies   (2007)  O’Neill

Court Applications Under the Companies Act (2013) Samad

Shorter Guides

Company Law – Nutshell 3rd Ed. (2013) McConville

Questions & Answers on Company Law (2008)        McGrath, N & Murphy

Make That Grade Irish Company Law 5th Ed. (2015) Murphy

Company Law BELR Series (2015)   O’Mahony

UK Sources

Companies Act 2006 (UK) (Legilsation.gov.uk)

Statute books Blackstone’s statutes on company law (OUP)

Gower Principles of Modern Company Law 10th Ed. (2016) P. and S. Worthington

Company Law in Context 2nd Ed. (2012) D Kershaw

Company Law (9th Ed.) OUP (2016) J Lowry and A Dignam

Cases and Materials in Company law 11th Ed (2016) Sealy and Worthington

 

UK Practitioners Services

Tolley’s Company Law Handbook

Gore-Browne on Companies

Palmer’s Company Law


 

Statutes

Powers of receiver

437. (1) Subject to the provisions of this section, a receiver of the property of a company has power to do, in the State and elsewhere, all things necessary or convenient to be done for or in connection with, or as incidental to, the attainment of the objectives for which the receiver was appointed.

(2) Without limiting the generality of subsection (1) but subject to subsection (4), a receiver of the property of a company has (in addition to any powers conferred by the order or instrument referred to in subsection (4) or by any other law) power to do one or more of the following things for the purpose of attaining the objectives for which he or she was appointed.

(3) Those things are:

(a) to enter into possession and take control of property of the company in accordance with the terms of the order or instrument referred to in subsection (4);

(b) to lease, let on hire or dispose of property of the company;

(c) to grant options over property of the company on such conditions as the receiver thinks fit;

(d) to borrow money on the security of property of the company;

(e) to insure property of the company;

(f) to repair, renew or enlarge property of the company;

(g) to convert property of the company into money;

(h) to carry on any business of the company;

(i) to take on lease or on hire, or to acquire, any property necessary or convenient in connection with the carrying on of a business of the company;

(j) to execute any document, bring or defend any proceedings or do any other act or thing in the name of and on behalf of the company;

(k) to draw, accept, make and endorse a bill of exchange or promissory note;

(l) to use a seal of the company;

(m) to engage or discharge employees on behalf of the company;

(n) to appoint a solicitor, accountant or other professionally qualified person to assist the receiver;

(o) to appoint an agent to do any business that the receiver is unable to do, or that it is unreasonable to expect the receiver to do, in person;

(p) where a debt or liability is owed to the company, to prove the debt or liability in a bankruptcy, insolvency or winding up and, in connection therewith, to receive dividends and to assent to a proposal for a composition or a scheme of arrangement;

(q) if the receiver was appointed under an instrument that created a charge on uncalled share capital of the company—

(i) to make a call in the name of the company for the payment of money unpaid on the company’s shares, or

(ii) on giving a proper indemnity to a liquidator of the company, to make a call in the liquidator’s name for the payment of money unpaid on the company’s shares;

(r) to enforce payment of any call that is due and unpaid, whether the calls were made by the receiver or otherwise;

(s) to make or defend an application for the winding up of the company;

(t) to refer to arbitration or mediation, any question affecting the company.

(4) Subsections (1) and (2) are subject to any provision of the order of the court by which, or the instrument under which, the receiver was appointed, being a provision that limits the receiver’s powers in any way.

(5) The conferral on a receiver, by this section, of powers in relation to property of a company does not affect any rights in relation to that property of any other person other than the company.

(6) In subsections (3) and (5) a reference, in relation to a receiver, to property of a company is a reference to the property of the company in relation to which the receiver was appointed; this subsection is in addition to section 2 (9) providing for construction of references to a receiver of property of a company.


Power of receiver and certain others to apply to court for directions and receiver’s liability on contracts

438. (1) Where a receiver of the property of a company is appointed under the powers contained in any instrument, any of the following persons may apply to the court for directions in relation to any matter in connection with the performance or otherwise, by the receiver, of his or her functions, that is to say:

(a) (i) the receiver;

(ii) an officer of the company;

(iii) a member of the company;

(iv) employees of the company comprising at least half in number of the persons employed in a permanent capacity by the company;

(v) a creditor of the company;

and

(b) (i) a liquidator;

(ii) a contributory;

and, on any such application, the court may give such directions, or make such order declaring the rights of persons before the court or otherwise, as the court thinks just.

(2) An application to the court under subsection (1), except an application under that subsection by the receiver, shall be supported by such evidence that the applicant is being unfairly prejudiced by any actual or proposed act or omission of the receiver as the court may require.

(3) For the purposes of subsection (1), “creditor” means one or more creditors to whom the company is indebted by more, in aggregate, than €13,000.

(4) A receiver of the property of a company shall be personally liable on any contract entered into by him or her in the performance of his or her functions (whether such contract is entered into by the receiver in the name of such company or in his or her own name as receiver or otherwise) unless the contract provides that he or she is not to be personally liable on such contract.

(5) In those circumstances, the receiver shall be entitled in respect of that liability to indemnity out of the assets of the company; but nothing in subsection (4) or this subsection shall be taken as—

(a) limiting any right to indemnity which the receiver would have apart from this subsection, or

(b) limiting the receiver’s liability on contracts entered into without authority or as conferring any right to indemnity in respect of that liability.

(6) Subsection (7) applies where a receiver of the property of a company has been appointed or purported to be appointed and it is subsequently discovered that the charge or purported charge in respect of which he or she was so appointed or purported to be appointed was not effective as a charge on such property or on some part of such property.

(7) Where this subsection applies, the court may, if it thinks fit, on the application of the receiver referred to in subsection (6), order that he or she be relieved wholly, or to such extent as the court shall think fit, from personal liability in respect of anything done or omitted by him or her in relation to any property purporting to be comprised in the charge by virtue of which he or she was appointed or purported to be appointed which, if such property had been effectively included in such charge or purported charge, would have been properly done or omitted by him or her and he or she shall be relieved from personal liability accordingly.

(8) In the event of such an order being made, the person by whom such receiver was appointed or purported to be appointed shall be personally liable for everything for which, but for such order, such receiver would have been liable.


Duty of receiver selling property to get best price reasonably obtainable, etc.

439. (1) A receiver of the property of a company shall, in selling property of the company, exercise all reasonable care to obtain the best price reasonably obtainable for the property as at the time of sale.

(2) Notwithstanding the provisions of any instrument and, in the case of paragraph (b), section 438 (4) and (5)—

(a) it shall not be a defence to any action or proceeding brought against a receiver in respect of a breach of his or her duty under subsection (1) that the receiver was acting as the agent of the company or under a power of attorney given by the company, and

(b) a receiver shall not be entitled to be compensated or indemnified by the company for any liability he or she may incur as a result of a breach of his or her duty under that subsection.

(3) A receiver shall not sell by private contract a non-cash asset of the requisite value to a person who is, or who, within 3 years prior to the date of appointment of the receiver, has been, an officer of the company unless the receiver has given at least 14 days’ notice of his or her intention to do so to all creditors of the company who are known to the receiver or who have been intimated to the receiver.

(4) In this section—

“non-cash asset” and “requisite value” have the meanings given to them by section 238 ;

“officer” includes a person connected (within the meaning of section 220 ) with—

(a) a director of the company,

(b) a shadow director of it, or

(c) a de facto director of it.

The text in italics on this page is sourced from the Irish Statute Book and is re-published under the Licence for Re-Use of Public Sector Information made pursuant to Directive 2003/98/EC Directive 2013/37/EU of the European Parliament and of the Council on the re-use of public sector information transposed into Irish law by the European Communities (Re-Use of Public Sector Information) Regulations 2005 to  2015.