Receiverships  Brian McEnery - Partner

Receiverships Brian McEnery - Partner PowerPoint PPT Presentation

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2 . Receivership. Appointed to a company in default of its financial obligations (Event of default)Where a debenture document existsA receiver secures the assets of a company which are chargedOften a debenture gives the chargeholder the authority to appoint a receiver

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Receiverships Brian McEnery - Partner

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1. Receiverships Brian McEnery - Partner

2. 2 Receivership Appointed to a company in default of its financial obligations (Event of default) Where a debenture document exists A receiver secures the assets of a company which are charged Often a debenture gives the chargeholder the authority to appoint a receiver & manager

3. 3 Receiver No formal qualification required, but can’t be: An officer of the Company within the last 12 months A parent, spouse, sibling or child of an officer A partner or employee of an officer A body corporate

4. 4 Appointment of a receiver On foot of a debenture, or By the Court A receiver can’t be appointed while an examiner is in situ A receiver can be appointed where a provisional or full liquidator is in situ

5. 5 Appointment of a receiver “Receiver” usually if the security is specific to an asset “Receiver & Manager” where security is over a range of assets Typically a receiver should receive an indemnification from the chargeholder (often resisted) Notification of appointment to Iris Oifigiúil, daily newspaper & the Companies Registration Office (CRO) The CRO will in turn inform the ODCE

6. 6 Effect of appointment of a Receiver Any floating charges crystalise and become fixed charges on the assets The powers of the directors are suspended in respect of the assets affected Where the receiver is also the manager he is entitled to carry on the business of the company The receiver may dispose of the assets affected

7. 7 Effect on management A receiver does not necessarily displace the management of the company A receivership does not mean termination of employment of employees and they remain employees of the company without personal recourse to the receiver Careful of Employees’ rights on Transfer of Undertakings

8. 8 Duties & obligations of Receivers Duty to act in the best interest of the chargeholder and not the best interest of the company – critical Duty on disposal – best price reasonably obtainable Duty in applying proceeds – fixed charge – disposal proceeds paid to chargeholder – where surplus arises this is paid back to company and not to e.g. preferential creditors

9. 9 Duties & obligations of Receivers Where a floating charge exists before the proceeds are paid to the debenture holder the preferential creditor must be discharged The ODCE is entitled to access to the books and records of a receiver A receiver is personally liable for any contract entered into by him unless provided otherwise Possible to have multiple receivers (triggers an event of default)

10. 10 Resignation or removal A receiver may resign by giving 1 months notice to the charge holders A receiver appointed by the Court must receive Court approval for his resignation If a petition to appoint an Examiner is lodged within 3 days of the appointment of a receiver the receiver appointment is withheld.

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