224 Liability of a receiver

Liability of a receiver

Section 183 CA imposes a personal liability on a receiver who is appointed by the court for debts incurred by him/her in the course of that receivership for services rendered, debts for goods purchased and debts for property hired, leased, used or occupied. However, although personally liable, a receiver (but not a manager) has a right to an indemnity to be indemnified out of the assets in respect of all liabilities properly incurred. However, in the case of a receiver/manager, the receiver has the right to be indemnified out of the assets in respect of all liabilities properly incurred by him/ her in carrying out the business of the company.

A receiver is liable to account for money coming into his/her hands. The receiver shall be made responsible for loss through his/her wilful default, or having the funds becomes out of his/her control. The receiver must comply with the receiver statutory duties and fulfil the receiver’s obligations without misconduct.

However, a receiver/manager not appointed by the court is not liable for contracts entered on behalf of the company under receivership. The receiver is an agent of the company if he/she is appointed pursuant to the debenture terms and conditions. The cause of action, if any, against the receiver would belong to the company (as principal) and to the debenture holder, but not to the third party plaintiff to whom no general duty is owed by the defendant.

 

Receivers’ remuneration, fees and disbursements

The receiver’s remuneration, fees and disbursements are set out in the document appointing the receiver and usually it is to be paid by the person appointing the receiver out of the net proceeds of sale of the company’s assets by the receiver.

However, a provision for receiver’s remuneration, fees and disbursements in such a document will not help a receiver whom services are terminated prematurely to claim for fees and disbursements. Therefore, it is important that a receiver obtains an indemnity for fees and disbursements incurred in carrying out his or her duty as a receiver from the person appointing him or her. A receiver whom services are terminated prematurely obtain the indemnity may base his or her claim for fees and disbursements.

 

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