B. The Source of the Receiver’s Powers

• Author: Roderick J. Wood
• Profession: Faculty of Law. University of Alberta
• Pages: 497-501

Contenidos

• 1) The Powers of the Court-Appointed Receiver.
• 2) The Powers of the Privately Appointed Receiver.
• 3) The Effect of Bankruptcy on the Powers of a Receiver.
• 4) The Effect of a Receivership on the Powers of Directors.

Page 497

1) The Powers of the Court-Appointed Receiver

The powers of a court-appointed receiver are those enumerated in the court order. A court-appointed receiver must be careful not to act in excess of the powers conferred in the court order, since this may result in a loss of the right to receive an indemnity for fees and expenses.¹¹

The receiver who has been privately appointed and who is subsequently appointed pursuant to a court order is limited to the powers conferred by the court order, and may not exercise any of the powers previously obtained pursuant to the private appointment.¹²

The template receivership order that has been developed in several provinces sets out the powers of the court-appointed receiver. These include the following powers:¹³· to take possession and control of the property and to protect and preserve it;

· to manage, operate, and carry on the business;

· to cease to carry on all or part of the business and to cease to perform any contract;

· to engage consultants and experts;

· to commence, continue, or defend a legal action and settle or compromise legal proceedings;

· to market the property for sale; and

· to report to and meet interested stakeholders and to discuss with them matters concerning the property.

The order will not give the receiver an unrestricted power to sell the assets outside the ordinary course of business, since the expectation is that the court will be required to grant its approval to any proposed sale. However, the template receivership order gives the receiver the power to sell property outside the ordinary course of business without the need for approval if it falls below a certain value specified in the order. The order also gives the receiver the power to borrow money up to a specified amount, and provides that such borrowings are secured

Page 498

by a first charge on the assets and have priority over all other interests including security interests.

The template order does not give the receiver the power to make an assignment in bankruptcy or consent to a bankruptcy order. Although this provision was included in some orders in the past, it was thought that the court should decide whether this course of action is appropriate since bankruptcy may have the effect of reversing the priority ranking of some of the creditors.¹⁴

2) The Powers of the Privately Appointed Receiver

The traditional view is that the privately appointed receiver’s powers are derived from both the secured creditor and the debtor. From the secured creditor, the receiver acquires the power to enforce the security interest against the collateral. This includes the right to take possession of the collateral, the right to sell it, and the right to apply the proceeds of sale against the secured obligation. These rights are proprietary rights that can be asserted not only against the debtor but also against a third party who has possession and control of the collateral, unless the third party holds a competing proprietary right that is entitled to priority over the secured party. It is no longer necessary to adopt an agency analysis in respect of a receiver’s power to enforce a security interest that is governed by personal property security legislation. The statutes give a receiver the right to enforce the security interest and impose liability on the receiver for the failure to comply with the enforcement regime.¹⁵From the debtor, the receiver acquires the power to manage the business. The security agreement that creates the right to appoint a receiver contains a clause that provides that the receiver is deemed to act as agent for the debtor. Deemed agency clauses have been upheld and given effect by courts in England and Canada. The powers that are conferred upon the receiver are derived from the...