B. Appointment of an Interim Receiver

• Author: Roderick J. Wood
• Profession: Faculty of Law. University of Alberta
• Pages: 477-478

Page 477

Since 1992, the BIA has given the bankruptcy court the power to appoint an interim receiver when a secured creditor had sent or was about to send a notice of intention to enforce its security.¹⁹Because the secured creditor was required to wait ten days following the notice before it could enforce its security, there was a danger that the debtor might dissipate the assets or otherwise engage in conduct that would harm the interests of the secured creditor. The ability to appoint an interim receiver provided a means through which the interests of the secured creditor could be protected. Some courts began to use the power to appoint an interim receiver as an alternative to the usual court appointment of a receiver.²⁰The orders appointing the interim receiver conferred wide powers that permitted the interim receiver to operate in the same manner as a court-appointed receiver.

The 2005/2007 amendments have curtailed the use of an interim receiver for this purpose. The appointment is effective for only thirty days unless a court renews it,²¹and the appointment also comes to an end if a court-appointed receiver, privately appointed receiver, or trustee takes possession of the property. The powers that may be given to an interim receiver have been limited too. The interim receiver may take possession of and exercise control over the property, take conservatory measures, and sell perishable property.²²The court no longer has the power to make any other order that it thinks advisable. A court is

Page 478

therefore unable to confer the same wide powers on an interim receiver that formerly permitted the interim receiver to dispose of the property and distribute the proceeds. The application must be brought in the judicial district of the locality of the debtor.²³Only a licensed trustee may be appointed as an interim receiver.²⁴An interim receiver may be appointed only if it is shown that it is necessary for the protection of the debtor’s estate or the interests of the secured creditor that sent the notice of intention.²⁵Prior to 2005/2007, courts differed on what was needed to satisfy this requirement. Some courts held that the applicant must demonstrate an actual and immediate danger of dissipation of assets rather than a concern based on suspicion and speculation.²⁶Other courts held that it is enough to show that the interim receiver would be able to carry out his or her duties more effectively and efficiently than a privately appointed...