Both positions of receiver and manager within a company are generally appointed by a secured creditor through powers contained in a mortgage or loan.
A company receiver and manager is usually appointed by a secured creditor under the powers contained in a secured loan or mortgage. Regulation of the nature and scope of the appointment is contained in the terms of the secured loan or mortgage and is supplemented by common law.
Corporate receivership arises most often from the insolvency or near insolvency of a company. However, breaches of terms of the security documents that have nothing to do with insolvency of the company can also result in an appointment of a receiver.
It is not only the failure to meet obligations to the secured creditor that can constitute default under a debenture or secured loan, but it is the most prevalent. Other events which can cause the company to be in default include ceasing to carry on business, having an application to wind up filed against the company in court or breaches of covenants such as failing to provide required financial information.
A company receiver and manager may also be appointed by the court. Typically, a receiver and manager may be appointed by the court under the Corporations Act 2001 in cases where the court considers it desirable or necessary to protect the interests of persons associated with the company.
A court appointed receiver and manager is an officer of the court. The nature and scope of the court appointment is governed by the specific orders of the court.
Technically, a receiver rather than a receiver and manager would not have power of management. Most contemporary appointments are receiver and manager appointments and these appointments do have the power of management of the company. The distinction is of less importance these days in respect of the private appointment as the powers given to a receiver are almost always extensive and cover the power to manage.
In summary the definitions are as follows:
Before a secured creditor entertains the notion of appointing a receiver it should consider a number of non-legal matters, such as:
Source: ARITA notes on Corporate Receivership.
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