Receivership

Question 1

2 methods of appointment

Answer 1

Court appointed: exercised in exceptional cases (Rea v Chix)

Security agreement: common method, creditor can enforce a security interest in case of default in loan payment

Question 2

power of receiver under common law

Answer 2

court-appointed receiver has only the powers expressly granted by the court order or security agreement

Question 3

power of receiver under the act (with case)

Answer 3

S14: powers conferred by the debenture or court order, including managing, maintaining, and selling company property

S19: receiver has a duty to obtain the best price for any assets sold (Davy v Nathan Securities)

Question 4

duties of receiver

Answer 4

S18: expected to act in good faith and for proper purpose (Downsview Nominees)

S19: extends the duty to consider the interests of other stakeholders, but the appointing creditors interests take precedence

Question 5

effects of receivership

Answer 5

On employees: employment generally not terminated

On directors: retain their position, but their powers are limited

On contracts: contracts entered into before the receivership generally remain in force

On company property: company retains possession of its property, but the receiver manages assets subject to the security

Question 6

termination of receivership

Answer 6

Ends once the receiver has paid off secured creditors and covered their fees