The sections, word for word
Every section on this subject, exactly as printed in the Official Gazette (Act No. 3 of 2020). The explanation follows beneath.
Section 550. Disqualification for appointment as a receiver or manager
(1) The following persons shall not be appointed or act as receivers or managers of any property or undertaking of any company —
(a) an infant ;
(b) any person found by a competent Court to be of unsound mind ;
(c) a body corporate ;
(d) an undischarged bankrupt, unless he is given leave to act as a receiver or manager of the property or undertaking of the company by the Court by which he was adjudged bankrupt ;
(e) a director or auditor of the company ; and (f ) any person convicted of any offence involving fraud, dishonesty, official corruption or moral turpitude or who is disqualified under section 280 of this Act.
(2) Any appointment made in contravention of the provisions of subsection (1) is void and if any of the persons named in paragraphs (c), (d acts as a receiver or manager, he commits an offence and is liable to a fine in such amount as the Commission shall specify in its regulations, and in the case of a body corporate or, in the case of an individual, to imprisonment for a term not exceeding six months or a fine as the Court deems fit.
(3) Where any of the persons mentioned in subsection (1) is at the commencement of this Act acting as a receiver or manager, he may be removed by a Court on an application by a person interested.
Section 551. Power of the court to appoint official receiver for debenture holders and other creditors
Where an application is made to the Court to appoint a receiver on behalf of the debenture holder or other creditors of a company which is being wound up by a court, an official receiver may be appointed.
Section 552. Appointment of receivers and managers by the Court
(1) Notwithstanding the provisions of section 233 (1) ( may, on the application of a person interested, appoint a receiver or a receiver and manager of the property or undertaking of a company if the—
(a) principal money borrowed by the company or the interest is in arrears ; or
(b) security or property of the company is in jeopardy.
(2) A receiver or manager of any property or undertaking of a company appointed by the Court is deemed to be an officer of the Court and not of the company and shall act in accordance with the directions and instructions of the Court.
Section 553. Receivers and managers appointed out of Court
(1) A receiver or manager of any property or undertaking of a company appointed out of Court under a power contained in any instrument is, subject to section 554 of this Act, deemed to be an agent of the person or persons on whose behalf he is appointed and, if appointed manager of the whole or any part of the undertaking of a company, he is deemed to stand in a fiduciary relationship to the company and observe the utmost good faith towards it in any transaction with it or on its behalf.
(2) Such a manager—
(a) shall act at all times in what he believes to be the best interests of the company as a whole so as to preserve its assets, further its business, and promote the purposes for which it was formed, and in such manner as a faithful, diligent, careful and ordinarily skillful manager would act in the circumstances ; and
(b) in considering whether a particular transaction or course of action is in the best interest of the company as a whole, may have regard to the interests of the employees, as well as the members of the company, and, when appointed by, or as a representative of, a special class of members or creditors may give special, but not exclusive, consideration to the interests of that class.
(3) Nothing contained in the articles, or in any contract, or in any resolution of a company, shall relieve any manager from the duty to act in accordance with subsection (2) or relieve him from any liability incurred as a result of any breach of such duty.
Section 554. Power of a receiver or manager appointed out of Court to apply to the Court for directions
A receiver or manager of the property of a company appointed under a power contained in any instrument, or the persons by whom or on whose behalf a receiver or manager has been so appointed may apply to the Court for directions in relation to any particular matter arising in connection with the performance of his functions, and on any such application the Court may give such directions or make such order declaring the rights of persons before the Court or otherwise, as it deems just.
Section 555. Notification to the Commission that a receiver or manager has been appointed
(1) Where a receiver or manager of the property of a company has been appointed, the receiver or manager shall within 14 days give notice of his appointment to the Commission indicating the terms of and remuneration for the appointment, and every invoice, order for goods or business letter issued by or on behalf of the company, receiver, manager or liquidator of the company, being a document on or in which the company’s name appears, shall contain a statement that a receiver or manager has been appointed.
(2) If default is made in complying with this section, the receiver, manager, liquidator or any officer of the company who is in default, authorises or permits the default as the case may be, commits an offence and is liable to a penalty for every day during which the default continues in such amount as the Commission shall specify in its regulations.
Section 556. Duties and powers of receivers and managers
(1) A person appointed as a receiver of any property of a company shall, subject to the rights of prior encumbrances, take possession of and protect the property, receive rents and profits and discharge all out-goings in respect thereof and realise the security for the benefit of those on whose behalf he is appointed, but unless he is an appointed manager, he does not have power to carry on any business or undertaking.
(2) A person appointed manager of the whole or any part of the undertaking of a company shall manage the same with a view to the realisation of the security of those on whose behalf he is appointed.
(3) Without prejudice to subsection (1) or (2), where a receiver or manager is appointed for the whole or substantially the whole of a company’s property, the powers conferred on him by the debentures by virtue of which he was appointed are deemed to include (except they are inconsistent with any of the provisions of those debentures) the powers specified in the Eleventh Schedule to this Act.
(4) From the date of appointment of a receiver or manager, the powers of the directors or liquidators in a members’ voluntary winding-up to deal with the property or undertaking over which he is appointed, shall cease, unless the receiver or manager is discharged or the security is realised.
(5) If, on the appointment of a receiver or manager, the company is being wound up under the provision relating to creditors’ voluntary winding-up, or the property concerned is in the hands of some other officer of the Court, the liquidator or officer shall not be bound to relinquish control of such property to the receiver or manager except under the order of the Court.
Section 557. Liabilities of receivers and managers on contracts
(1) A receiver or manager of any property or undertaking of a company is personally liable on any contract entered into by him except in so far as the contract otherwise expressly provides.
(2) As regards contracts entered into by a receiver or manager in the proper performance of his functions, such receiver or manager is, subject to the rights of any prior encumbrance, entitled to an indemnity in respect of liability thereon out of the property over which he has been appointed to act as a receiver or manager.
(3) A receiver or manager appointed out of Court under a power contained in any instrument is also entitled, as regards contracts entered into by him with the express or implied authority of those appointing him, to an indemnity in respect of liability thereon from those appointing him to the extent to which he is unable to recover in accordance with subsection (2).
Section 558. Power of the Court to fix remuneration on application of liquidator
(1) The Court may, on the application of the company or the liquidator, by order fix the amount to be paid by way of remuneration to any person who, under the powers contained in any instrument, has been appointed as a receiver or manager of the property of the company.
(2) The powers of the Court under subsection (1) shall, where no previous order is made under that subsection—
(a) extend to fixing the remuneration for any period before the making of the order or the application ;
(b) be exercisable notwithstanding that the receiver or manager has died or ceased to act before the making of the order or the application ; and
(c) extend, where the receiver or manager has been paid or has retained as his remuneration for any period before the making of the order any amount in excess of that so fixed for that period, to requiring him or his personal representatives to account for the excess or such part as may be specified in the order : Provided that the power conferred by this paragraph shall not be exercised as respects any period before the making of the application for the order unless, in the opinion of the Court there are special circumstances making it proper for the power to be exercised.
(3) The Court may, on an application made by the company, liquidator or by the receiver or manager, vary or amend an order made under subsection (1).
(4) This section applies whether the receiver or manager has been appointed before or after the commencement of this Act.
Section 559. Information where receiver or manager appointed in respect of a floating charge
(1) Where a receiver or manager of the whole or substantially the whole of the property of a company (in this section and in section 560 of this Act referred to as “the receiver”) has been appointed on behalf of the holders of any debentures of the company secured by a floating charge, then, subject to the provisions of this section and of section 560 of this Act —
(a) the receiver shall immediately send notice to the company of his appointment and the terms ;
(b) there shall, within 14 days after receipt of the notice, or such longer period as may be allowed by the Court or by the receiver, be made out and submitted to the receiver in accordance with section 560 of this Act, a statement in the prescribed form as to the affairs of the company ; and
(c) the receiver shall, within two months after receipt of the statements, send to—
(i) the Commission or Court a copy of the statement and of any comments he sees fit to make thereon and in the case of the Commission also a summary of the statement and of his comments, if any,
(ii) the company a copy of any comments or if he does not think fit to make any comment, a notice to that effect, and
(iii) any trustees for the debenture holders on whose behalf he has been appointed and, so far as he is aware of their addresses, to all such debenture holders, a copy of the said summary.
(2) The receiver shall within two months, or such longer period as the Court may allow after the expiration of the period of 12 months from the date of his appointment and of every subsequent period of 12 months, and within two months, or such longer period as the Court may allow after he ceases to act as receiver or manager of the property of the company, send to the Commission, any trustee for the debenture holders of the company on whose behalf he was appointed, the company and (if he is aware of their addresses) all debenture holders (if he is aware of their addresses), an abstract in the prescribed form showing his receipts and payments during that period of 12 months, or, where he ceases to act, during the period from the end of the period to which the last preceding abstract relates up to the date of his so ceasing, and the aggregate amounts of his receipts and payments during all preceding periods since his appointment.
(3) Where the receiver is appointed under the powers contained in any instrument, this section has effect with the —
(a) omission of the references to the Court in subsection (1) ; and
(b) substitution for the references to the Court in subsection (2), of references to the Commission and in any other case references to the Court shall be taken as referring to the Court by which the receiver was appointed.
(4) Subsection (1) does not apply in relation to the appointment of a receiver or manager to act with an existing receiver or manager or in place of a receiver or manager dying or ceasing to act, except that, where that subsection applies to a receiver or manager who dies or ceases to act before it has been fully complied with, the references in paragraphs (b) and (c) to the receiver shall, subject to subsection (5), include references to his successor and to any continuing receiver or manager and nothing in this subsection shall be taken as limiting the meaning of the expression “the receiver” where used in, or in relation to, subsection (2).
(5) This section and section 560 of this Act, where the company is being wound up, apply notwithstanding that the receiver or manager and the liquidator are the same person.
(6) Nothing in subsection (2) shall be taken to prejudice the duty of the receiver to render proper accounts of his receipts and payments to the persons to whom, and at the times at which, he may be required to do so apart from that sub-section.
(7) If the receiver makes default in complying with the requirements of this section, he is liable to a penalty for every day during which the default continues in such amount as the Commission shall specify in its regulations.
Section 560. Special provisions as to statement submitted to receiver
(1) The statements as to the affairs of a company required by section 559, to be submitted to the receiver (or his successor) shall, show as at the date of the receiver’s appointment—
(a) the particulars or the company’s assets, debts and liabilities ;
(b) the names, residences and occupations of its creditors ;
(c) the securities held by the directors respectively ;
(d) the dates when the securities were respectively given ; and
(e) such further or other information as may be prescribed.
(2) The statement shall be submitted, and verified by affidavit of one or more of the persons who are, at the date of the receiver’s appointment, the directors and by the person who is, at that date, the secretary of the company, or by the receiver or his successor, subject to the direction of the court, may require to submit and verify the statement of who—
(a) are or have been officers of the company ;
(b) have taken part in the formation of the company at any time within one year before the date of the receiver’s appointment ;
(c) are in the employment of the company, or have been in the employment of the company within the year, and are in the opinion of the receiver capable of giving the information required ; or
(d) are or have been within the said year officers of or in the employment of a company which is, or within the said year was, an officer of the company to which the statement relates.
(3) A person making the statement and affidavit is allowed, and shall be paid by the receiver (or his successor) out of his receipts, such costs and expenses incurred in the preparation and making of the statement and affidavit as the receiver or his successor may consider reasonable, subject to an appeal to the Court.
(4) Where the receiver is appointed under the powers contained in any instrument, this section has effect with the substitution for references to the Court of references to the Commission and references to an affidavit, of references to a statutory declaration and in any other case references to the Court is taken as referring to the Court by which the receiver was appointed.
(5) If any person without reasonable excuse makes default in complying with the requirements of this section, he is liable to a penalty as may be prescribed by the Regulation for every day during which the default continues.
(6) References in this section to the receiver’s successor include a continuing receiver or manager.
Section 561. Delivery to Commission of accounts of receivers and managers
(1) Except where section 559 (2) of this Act applies, every receiver or manager of the property of a company who has been appointed under the powers contained in any instrument shall, within one month or such longer periods as the Commission may allow, after the expiration of the period of six months from the date of his appointment, and of every subsequent period of six months, and within one month after he ceases to act as receiver or manager, deliver to the Commission for registration an abstract in the prescribed form showing his receipts and his payments during that period of six months, or where he ceases to act, during the period from the end of the period to which the last preceding abstract relates, up to the date of his ceasing, and the aggregate amount of his receipts and of his payments during all preceding periods since his appointment.
(2) Every receiver or manager who makes default in complying with the provisions of this section is liable to a penalty as may be prescribed in the regulation for every day during which the default continues.
Section 562. Enforcement of duty of receivers and managers to make returns, etc.
(1) If any receiver or manager of the property of a company having—
(a) made default in filing, delivering or making any returns, account or other document, or in giving any notice which a receiver or manager is by law required to file, delivers, makes, gives or fails to make good the default within 14 days after the service on him of a notice requiring him to do so, or
(b) been appointed under the powers contained in any instrument has, after being required at any time by the liquidator of the company so to do, fails to render proper accounts of his receipts and payment and to vouch the same and to pay over to the liquidator the amount properly payable to him, the Court may, on an application made for that purpose, make an order directing the receiver or manager, as the case may be to make good the default within such time as may be specified in the order.
(2) In the case of any default under subsection (1)(a), an application may be made by any member or by the Commission, and in the case of any default under subsection (1)(b), the application shall be made by the liquidator, and in either case the order may provide that all costs shall be borne by the receiver or manager.
(3) Nothing in this section shall be taken to prejudice the operation of any enactment imposing penalties on receivers in respect of any default mentioned in subsection (1).
Section 563. Construction of references to receivers and managers
Any reference in this Act to—
(a) a receiver or manager of the property of a company, or to a receiver thereof, includes a reference to a receiver or manager, or to a receiver of part only of that property and to a receiver only of the income arising from that property or from part thereof ; and
(b) the appointment of a receiver or manager under powers contained in any instrument, includes a reference to an appointment made under powers which, by virtue of any enactment, are implied in and have effect as if contained in an instrument.
What this means
Short answer
A receiver or manager takes control of company property to realise the security of those who appointed him. The court can appoint one where borrowed money or interest is in arrears or the security is in jeopardy (section 552), or the holder of a debenture can appoint one out of court under the debenture. He must notify the Commission within 14 days (section 555) and is personally liable on his contracts, with a right of indemnity (section 557).
Who cannot be a receiver or manager
Not eligible are a minor, a person of unsound mind, a body corporate, an undischarged bankrupt (unless the bankruptcy court gives leave), a director or auditor of the company, and a person convicted of fraud, dishonesty, official corruption or moral turpitude or disqualified under section 280. An appointment against these rules is void, and a body corporate, bankrupt or other disqualified person who acts commits an offence (section 550).
How a receiver is appointed
- By the court. On the application of a person interested, the court can appoint a receiver or receiver and manager of the company’s property or undertaking if principal money or interest is in arrears or the security is in jeopardy. He is an officer of the court, not of the company, and follows the court’s directions (section 552). Where a company is being wound up by the court, an official receiver can be appointed for debenture holders and other creditors (section 551).
- Out of court. A receiver or manager appointed under a power in an instrument is the agent of those who appointed him. A manager of the undertaking is in a fiduciary relationship with the company and must act in what he believes to be its best interests, as a faithful, diligent, careful and ordinarily skilful manager would, and may have regard to employees as well as members. Nothing in the articles or a contract can relieve him of that duty (section 553). He or his appointors can apply to the court for directions (section 554).
Notice and documents
Within 14 days of appointment the receiver gives the Commission notice of the appointment, with its terms and his remuneration. Every invoice, order and business letter of the company must state that a receiver or manager has been appointed. Defaulters face daily penalties set by the Commission (section 555).
Duties and powers
- A receiver takes possession of and protects the property, receives rents and profits, discharges outgoings and realises the security for those who appointed him, subject to prior encumbrances. Unless he is also a manager he cannot carry on the business (section 556(1)).
- A manager manages the undertaking with a view to realising the security (section 556(2)).
- For a receiver of the whole or substantially the whole of the property, the powers in the debentures are deemed to include those in the Eleventh Schedule (section 556(3)).
- From appointment, the directors’ powers over that property cease, and a liquidator in a members’ voluntary winding up loses his. A liquidator in a creditors’ winding up need not hand over property except by court order (section 556(4) and (5)).
Liability and pay
A receiver or manager is personally liable on contracts he enters into unless the contract says otherwise, but is entitled to an indemnity out of the property, and, if appointed out of court, from those who appointed him to the extent he cannot recover from the property (section 557). The court can fix his remuneration on the application of the company or the liquidator, including for past periods, and can order him to account for any excess (section 558).
Reports and accounts
- Where a receiver is appointed for floating-charge debenture holders over the whole or substantially the whole of the property, he notifies the company at once and a statement of affairs is submitted to him within 14 days. Within two months of receiving it he sends the Commission or court, the company and the trustees and debenture holders the statement, his comments and a summary (section 559(1)).
- Within two months of each 12-month period, and of ceasing to act, he sends an abstract of receipts and payments to the Commission, trustees, company and holders (section 559(2)).
- The statement shows assets, debts and liabilities, creditors and their securities, and is verified by the directors and secretary, or by others the receiver requires (section 560).
- A receiver appointed under an instrument who is not covered by section 559(2) delivers an abstract to the Commission within one month after each six months and after he ceases to act (section 561).
- If a receiver defaults on returns, a member or the Commission can apply to the court for an order after 14 days’ notice, and a liquidator can apply if the receiver fails to account to him (section 562).
References to a receiver or manager include one of part only of the property or of income only, and appointments under powers implied by an enactment (section 563).
Questions and answers
Who cannot be appointed a receiver or manager?
A minor, a person of unsound mind, a body corporate, an undischarged bankrupt without court leave, a director or auditor of the company, and certain convicted or disqualified persons (section 550).
How soon must a receiver notify the Commission?
Within 14 days of appointment, giving the terms of the appointment and his remuneration (section 555).
Is a receiver personally liable on contracts?
Yes, unless the contract provides otherwise, but he is entitled to an indemnity out of the property (section 557).
When can the court appoint a receiver?
On the application of a person interested, where principal money or interest is in arrears or the security or property is in jeopardy (section 552).
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