The section on a receiver’s powers (Section 437) is new. It is modelled on Australian Corporations law. In addition to powers conferred on receivers by court order or debenture, certain new powers are conferred on receivers. It is hoped that this will alleviate problems which arise from badly drafted debentures.
The power to apply to Court for directions is taken from the old Section 316 of the 1963 Act. Apart from the receiver, the following people are entitled to make the application: an officer of the company; a member of the company; employees of the company comprising at least half in number of the persons employed in a full-time capacity by the company; a creditor of the company. Also capable of making an application is a liquidator or a contributory.
If any of the above people make an application, it must be supported by evidence that they are being “unfairly prejudiced by any actual or proposed act or omission of the receiver.”
The definition of creditor has been modified; a creditor now means one or more creditors to whom the company is indebted by more than €13,000 (in aggregate).
The personal liability provisions regarding receivers have not changed.
A receiver of the property of the company is personally liable on any contract entered into by him in the performance of his functions, unless the contract provides otherwise. This is true whether the receiver enters the contract in the name of the company or in his own name.
Receivers are entitled to an indemnity out of the assets of the company.
Receivers have no personal liability for contracts that were entered into before their appointment, unless there is novation. Continuing contracts that are already in existence does not count as novation.
If a receiver permits employees of the company to keep on working, it is the company and not the receiver which is liable for their wages. Usually, employment contracts retain their binding force despite a receiver’s appointment if he is appointed by debenture. If he is appointed by the Court, this action automatically dismisses all the employees.
If the receiver breaks a contract that was entered into by the company before his appointment, he is not guilty of the tort of inducing a breach of contract. The receiver doesn’t have to fulfil all existing contracts. If he did, it would mean unsecured creditors would be in a stronger position than the secured creditor. The only exceptions to this are contracts for the sale of land or the granting of a lease. They can be enforced; a party may successfully pursue specific performance in such cases.
What happens where the receiver finds out that the charge on which he was appointed was not effective? Will he be liable for anything done or omitted by him in relation to any property purporting to be comprised in the charge? In such cases, he may be relieved from personal liability by making an application to the Court (Section 438(6) and (7)). If the Court relieves the receiver from liability, the person who appointed the receiver will be liable for everything the receiver would have been liable for.
The duty of the receiver to selling the property of a company for the “best price reasonably obtainable…as at the time of sale” is unchanged. The old Section 316A of 1963 becomes Section 439 in the new Act.
Receivers must exercise “all reasonable care” in this part of their work.
If a receiver breaches this duty, it is no defence to say “I was acting as an agent of the company”, or “I was acting under a power of attorney given by the company”. Also, if the receiver breaches this duty, he is not entitled to any indemnity or compensation from the company.
If a receiver wishes to sell a non-cash asset of the company to a person who was an officer of the company within three years prior to the date of the receiver’s appointment, the receiver must give notice of his intention to do this to all creditors of the company. The notice period is 14 days.
This section (Section 440) is a re-enactment of the old Section 98 of 1963.
If a company is not being wound up then first of all, preferential debts are to be paid out by the receiver. This is the case if the receiver is appointed pursuant to a floating charge.
The provisions relating to payment of accrued holiday pay in a winding up are applied to situations where a receiver has been appointed (Section 440(2))
These payments are to be recouped from the assets of the company which are available for payment of general creditors.
Every six months a receiver must send the Registrar an abstract showing the assets of the company, their estimated value, and the proceeds of sale if any. An abstract containing this information must also be sent to the Registrar within thirty days of the receiver ceasing to act.
The receiver must keep receipts and other details of the above. Failure to do so can leave a receiver open to a fine of up to €5,000. (Section 441)