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Summary
Part 8 describes the authority and role of receivers and receiver-managers.
Receivers may not carry on the activities of the corporation except as
permitted by a court, whereas a receiver-manager may carry on the activities
of the corporation. While a receiver-manager is authorized to act, the
directors of the corporation may not re-assume their role. (Sections
117-119)
Receivers and receiver-managers are obliged to act in accordance with
any instrument or court order responsible for, or relevant to, their
appointment. They must also act in good faith and in a commercially reasonable
manner. Certain specific duties must be carried out. (Sections 120-122,
124)
The Part also addresses orders, notices or remedies for which an interested
party may apply to a court. (Section 123)
This Part addresses the standard procedures to be followed when a receiver
or receiver-manager is appointed. The appointment, or the potential for
such an appointment, is a usual consideration under corporate law. The
terms included in the Act are those that are generally included in corporate
law instruments, such as the Canada Business Corporations Act.
Briefing Book
An Act Respecting Not-for-Profit Corporations and
Other Corporations Without Share Capital
Top
Bill Clause No. 117
Section No. 117
Topic: Receivers and
Receiver-managers
Proposed Wording
117. A receiver of any property of a corporation may, subject to the rights
of secured creditors, receive the income from the property, pay the liabilities
connected with the property and realize the security interest of those on
behalf of whom the receiver is appointed, but, except to the extent permitted
by a court, the receiver may not carry on the activities of the corporation.
Rationale
This section states clearly the general rights and duties of receivers and
ensures that the law is uniform across Canada with respect to federal corporations
that are in receivership. It should be noted that a receiver's function is
not to carry on the activities of the corporation (e.g., not fulfil the role
of a receiver-manager) except to the extent that the court permits.
The role of a receiver is largely commercial in nature, with the purpose
being to satisfy the debts owed to the creditor who appointed the receiver
and any other senior creditors. This is generally accomplished by a liquidation
of assets. For example, the creditors can have a receiver appointed if
a corporation fail to pay its debts or meet its contractual obligations
as they come due. This provision would clarify that a receiver can also
act in relation to a not-for-profit corporation and limits the role the
receiver can take in such cases.
Present Law
None.
Top
Bill Clause No. 118
Section No. 118
Topic: Receivers and Receiver-managers
Proposed Wording
118. A receiver of a corporation who is also appointed receiver-manager of
the corporation may carry on any activities of the corporation to protect the
security interest of those on behalf of whom the receiver is appointed.
Rationale
This section states clearly the general rights and duties of receiver-managers
and ensures that the law is uniform across Canada with respect to federal corporations
that are in receivership. It should be noted that a receiver-manager, unlike
a receiver, can carry on the activities of the corporation to protect the interests
of those on behalf of whom the receiver-manager is appointed.
Present Law
None.
Top
Bill Clause No. 119
Section No. 119
Topic: Receivers and Receiver-managers
Proposed Wording
119. The powers of the directors of the corporation that a receiver-manager
is authorized to exercise may not be exercised by the directors until the receiver-manager
is discharged.
Rationale
This section ensures that there is a re-allocation of authority and responsibility
according to which powers of the directors are bestowed on a receiver-manager.
Once a receiver-manager is appointed, the powers of the directors are suspended
to the extent that the receiver-manager is authorized to exercise them. The powers
of the directors remain suspended until the receiver-manager is discharged, at
which point the powers revert to the directors.
Present Law
None.
Top
Bill Clause No. 120
Section No. 120
Topic: Receivers and Receiver-managers
Proposed Wording
120. A receiver or receiver-manager appointed by a court shall act in accordance
with the orders of the court.
Rationale
This section makes it clear that a receiver or receiver-manager appointed by
the court is an officer of the court and must act in accordance with the directions
of the court.
Present Law
None.
Top
Bill Clause No. 121
Section No. 121
Topic: Receivers and Receiver-managers
Proposed Wording
121. A receiver or receiver-manager appointed under an instrument shall act
in accordance with that instrument and any order of a court made under section
123.
Rationale
This section clarifies the responsibilities of a receiver or receiver-manager
appointed under a financial instrument. Unlike a court appointed receiver or
receiver-manager, a receiver or receiver-manager appointed under a financial
instrument is not an officer of the court. As such, the receiver or receiver-manager
duties are to act in accordance with the instrument appointing him/her and any
subsequent directions from the court.
Present Law
None.
Top
Bill Clause No. 122
Section No. 122
Topic: Receivers and Receiver-managers
Proposed Wording
122. A receiver or receiver-manager of a
corporation appointed under an instrument shall
(a) act honestly and in good faith; and
(b) deal with any property of the corporation in their possession or
control in a commercially reasonable manner. |
Rationale
This section imposes on a receiver or receiver-manager the same duty of care
that applies to directors, except that the receiver or receiver-manager may
give special consideration to the creditors on whose behalf the receiver
or receiver-manager
is appointed. Since a receiver or receiver-manager will assume many of the
responsibilities of the directors, it is justifiable that the receiver
or receiver-manager is
subject to the same obligations and responsibilities. However, it has to be
recognized that the receiver or receiver-manager also has obligations and
responsibilities
to the person(s) on whose behalf the receiver or receiver-manager is appointed.
Present Law
None.
Top
Bill Clause No. 123
Section No. 123
Topic: Receivers and Receiver-managers
Proposed Wording
123. On the application of a receiver or
receiver-manager, whether appointed by a court or under an instrument, or of
any interested person, a court may make
(a) an order appointing, replacing or discharging a receiver
or receiver-manager and approving their accounts;
(b) an order determining the notice to be given to any person or dispensing
with notice to any person;
(c) an order fixing the remuneration of the receiver or receiver-manager;
(d) an order requiring the receiver or receiver-manager, or a person
by or on behalf of whom the receiver or receiver-manager is appointed, to make
good any default in connection with the receiver's or receiver-manager's custody
or management of the property and activities of the corporation, or relieving
the receiver or receiver-manager, or a person by or on behalf of whom the receiver
or receiver-manager was appointed, from any default on any terms that the court
thinks fit;
(e) an order confirming any act of the receiver or receiver-manager;
(f) an order giving directions on any matter relating to the duties
of the receiver or receiver-manager; and
(g) any other order that it thinks fit. |
Rationale
This section gives a receiver, receiver-manager or any other interested person
a right to apply to a court for an order on any matter concerning the receivership.
The court's power is broad as it can make any order it thinks fit.
Present Law
None.
Top
Bill Clause No. 124
Section No. 124
Topic: Receivers and Receiver-managers
Proposed Wording
124. A receiver or receiver-manager shall
(a) immediately notify the Director of their appointment and
discharge;
(b) take into their custody and control the property of the corporation
in accordance with the court order or instrument under which they are appointed;
(c) open and maintain a bank account in their name as receiver or receiver-manager
of the corporation for the money of the corporation coming under their control;
(d) keep detailed accounts of all transactions carried out as receiver
or receiver-manager;
(e) keep accounts of their administration that shall be available during
usual business hours for inspection by the directors of the corporation;
(f) prepare at least once in every prescribed period after the date
of their appointment financial statements of their administration as far as is
practicable in the form required by section 172; and
(g) on completion of their duties, render a final account of their administration
in the form adopted for interim accounts under paragraph (f). |
Rationale
This section states explicitly the duties of a receiver and receiver-manager.
It is drafted to correspond closely with section 229 (duties of a liquidator)
so that there can be a smooth transition if a receivership is followed by
a liquidation.
Present Law
None.
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Corporate and Insolvency Law Policy
