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.
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.
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.
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
- 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.
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
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
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
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