Where a receiver is appointed, every document on which the name of the company appears must contain a statement that a receiver has been appointed (for example, invoices, orders for goods, business letters).
If a receiver is appointed and a winding up of the company is also taking place, the same as above applies, with the additional obligation that the documentation carry notice that the company is being wound up. (This holds good whether the winding up began before or after the receiver’s appointment).
Once a receiver is appointed, all emails sent by the company must state that the company is in receivership, and any website of the company must say it too. That information must be given a prominent position on the website.
The essence of these provisions is that all third parties dealing with the company are fully aware of the state of play. “Third party” means everybody except an officer or employee of the company, or a holding company or subsidiary company (or any of their employees).
If these provisions are not observed then officers of the company will be guilty of a Category 4 Offence, i.e. a fine of up to €5,000.
Where a receiver is appointed under a floating charge he must notify the company of his appointment immediately.
Once that notice is received, the company has 14 days to provide the receiver with a statement of affairs of the company. (For what must be included in the statement of affairs, click here – Section 431)
If this is not forthcoming, the receiver or any creditor may apply to Court to compel compliance (Section 432). This is not new, and has been an important provision for creditors who wish to obtain financial information about the company which allows them to judge whether or not to pursue officers of the company for reckless trading.
Within 2 months of receiving that statement of affairs, the receiver must provide a copy of that statement to the Registrar of Companies, together with his comments on the company. He must provide the same for debentureholders or their trustees.
When the Registrar learns of the receiver’s appointment, she has a duty to inform the Director of Corporate Enforcement (“DCE”) of it.
The receiver must send the Registrar a new item, called “an abstract in the prescribed form”. This will contain information about the assets of the company which he or she has control of and details of transactions he or she has made. The receiver must send this information within 30 days of the expiration of the first 6 month period, and repeat it each 6 months – and repeat it once more within 30 days after the date when he/she ceases to act as receiver. If the receiver has ceased to act, the abstract must contain the receiver’s opinion as to whether the company is solvent (the Registrar has a duty to forward this opinion on to the DCE, whatever the opinion states).
Any defaults in complying with these provisions render a receiver liable to a €5,000 fine.
The list of persons who are not qualified to act as receivers has been taken unchanged from Section 315 of the 1963 Act.
1. an undischarged bankrupt;
2. a person who is, or who has within 12 months of the commencement of the receivership been, an officer or employee of the company;
3. a parent, spouse, civil partner, brother, sister or child of an officer of the company;
4. a person who is a partner of, or in the employment of, an officer or servant of the company;
5. a person who is not qualified for appointment as receiver of the property of any other body corporate which is that company’s subsidiary or holding company or a subsidiary of that company’s holding company, or would be so disqualified if the body corporate were a company.
6. A body corporate.
Persons who fall into the above categories must vacate their office within 14 days and give notice of same to the company, the Registrar, the debentureholder or the Court (whichever of these last two appointed the person). Acting as a receiver when disqualified, and/or failing to vacate and give notice after the inability is discovered, leaves that person open to a Category 2 Offence, i.e., a fine of up to €5,000 or 12 month prison sentence upon summary conviction (Section 871(2))
A receiver may resign but must give 30 days’ notice. Resignation cannot be with immediate effect; the soonest it can begin is 30 days’ from the giving of notice.
Notice must be given to the holder of charges and the company (or its liquidator).
Court appointed receivers may only resign with the leave of the Court, and subject to any terms and conditions the Court may specify.
Default leaves the receiver open to a fine of up to €5,000.
The Court may remove a receiver and appoint a new one. The person applying to have the receiver removed must “show cause”. In this regard, a receiver can be removed simply for not having gone about the job with enough vigour. It may be argued that the interests of the general creditors are better served by removing him. It is not necessary to argue that he was in breach of duty or guilty of any misconduct. It may simply be that his independence is put in doubt. Where such applications are to take place, the receiver must be served with the proceedings not less than 7 days before the hearing date. The receiver, of course, has a right to appear and be heard at these proceedings.
It should be noted that while the company cannot apply to have the receiver removed on the basis that he is the agent of the company, it could make an application under the grounds outlined above.