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Final

MLL221 Study Guide - Final Guide: Secured Creditor, Security Interest, Trading While Insolvent

18 pages66 viewsFall 2018

Department
Business and Law
Course Code
MLL221
Professor
Jean Du Pleiss
Study Guide
Final

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Corporate Law Topic Ten
RECEIVERSHIP:
What is receivership?
Form of external administration that involves the appointment of an independent practitioner called a receiver
Who may appoint?
A receiver may be appointed by:
Secured creditor (to enforce their security)
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Court (if necessary to protect the interests of any person to whom the company may be
liable)
Who may be a receiver?
A receiver must be a registered liquidator: s 418(1)(d).
Section 418 disqualifies the following persons from acting as receiver:
o A secured party in relation to any property of the corporation; or
o A director, secretary, senior manager or employee of a body corporate that is a secured
party in relation to any property of the corporation; or
o An auditor, director, secretary, senior manager or employee of:
the corporation; or
a body corporate related to the corporation;
o A person who has been a director, secretary, senior manager, employee or promoter of the
corporation or of a related body corporate within the last 12 months.
What events trigger the right to appoint a receiver?
Look at the instrument
o debenture or security agreement
Example:
o Default in payment
o Company ceases to carry on business or operates at a loss
o Application to wind up company
o Capital reduction
If security put at risk by failure to maintain or insure
What happens if appointment is defective?
There must be valid grounds to appoint the receiver
If not, receiver may be trespassing!
Receiver who takes possession of secured property when appointment is defective
may be liable in damages to the company as a trespasser
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Appointment by Court
Section 233 remedies.
Section 1323: ASIC can apply to Court to appoint receiver of property of person/company where:
ASIC investigating breach of Corporations Act;
ASIC prosecuting for breach of Corporations Act; or
Civil proceedings instigated for breach of Corporations Act.
Drastic step
Court will appoint receiver if necessary to protect interests of person to whom company may
be liable
Only available if a lesser remedy would be inadequate
Beach Petroleum NL v Johnson (1993)
Statutory powers of receivers
s. 420(1)
Receiver has wide power to do all things necessary or convenient in order to achieve the objectives of the
receivership
s. 420(2) lists examples
Carry on business
Sell property
Borrow
Execute documents
Bring/defend legal proceedings
Hire and fire
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