Set-off of mutual debts
Only mutual debts can be set off. If there is no mutuality in beneficial interest there is no right to set-off. If the goods or services (which give rise to a claim for set-offs) are supplied after the appointment of the receiver, it can be set-off provided that the supply is in pursuance of a contractual obligation that was created before the appointment.
Powers of the board upon appointment of receiver
Upon appointment by the court, a receiver is given such full power and control over the company’s assets and property. The directors are left with little, if anything, to control. Although the directors are powerlessness on the property of the company which is appointed to the receiver by the court, this does not mean that they are relieved of their statutory duties as directors. They must continue to carry out their duty as director.
A receiver should therefore provide the directors with such information as is necessary for them to comply with their obligations under the Act. The receiver is not under any obligation (other than preparing and verifying the statement of affairs) to pay anything to the directors towards the costs of meeting their obligations under the Act.
Prior contracts not terminated
Contracts entered into by a company prior to the appointment by the court of a receiver are not terminated by the appointment. The receiver who is also a manager is under a positive duty to preserve the goodwill and property of the company. Therefore, the receiver must fulfil the company trading contracts entered before his/her appointment.
The court appointed receiver who is not a manager is in a different position and the receiver’s obligation to continue contracts entered into the company prior to the appointment will depend on the terms of the order appointing him/her.