Sections 262 to 267 of the Companies Act 1997 equip a receiver to do the job.
Section 264 — the powers
A receiver has the powers and authorities expressly or impliedly conferred by the deed or agreement or the order of the Court by or under which the appointment was made.
Subject to that deed, agreement or order, a receiver may —
(a) demand and recover, by action or otherwise, income of the property in receivership;
(b) issue receipts for income recovered;
(c) manage the property in receivership;
(d) insure it;
(e) repair and maintain it;
(f) inspect at any reasonable time documents relating to it that are in the possession or under the control of the company;
(g) exercise, on behalf of the company, a right to inspect documents relating to it in the possession or control of a person other than the company;
(h) where appointed in respect of all or substantially all of the assets and undertaking, change the registered office or address for service of the company.
There is no statutory power of sale. Section 254 expressly contemplates a receiver appointed “whether or not the person appointed is empowered to sell any of the property in receivership”. A power to sell — or to borrow, to grant leases, or to carry on the business beyond mere management — must come from the security document or the Court order.
That makes section 264(1) the operative provision in practice. Well-drafted debentures confer a long list of express powers; the section 264(2) list is a floor, not a ceiling, and it yields wherever the document says otherwise.
Section 262 — getting the records
(a) make available to the receiver all books, documents, and information relating to the property in receivership in the company’s possession or under its control; and
(b) where required by the receiver, verify by statutory declaration that they are complete and correct; and
(c) give the receiver such assistance as he may reasonably require.
Under section 262(2), on the receiver’s application the Court may order the company or a director to comply.
Section 262(1) binds the company and every director. And “director” in section 254 is defined widely for this Part — it includes a person occupying the position by whatever name called and a person in accordance with whose directions the board is accustomed to act. A shadow director cannot avoid section 262 by pointing to the absence of a formal appointment.
Compare the equivalent liquidation power in section 311, which is wider still: a liquidator may require a person to attend and be examined and may seek Court orders against third parties. A receiver’s reach is confined to the property in receivership.
Failure by the company to make information available must be recorded: section 273(1)(e) requires the first report to give particulars of any default by the company in making relevant information available.
Section 265 — calls on uncalled capital
(1) A receiver has the same powers as the directors — or, where the company is being wound up or in liquidation, as the directors would have if it were not — to make calls on the members or shareholders in respect of uncalled capital that is charged under the deed or agreement by or under which the receiver was appointed, and to charge interest on, and enforce payment of, calls.
(2) “Uncalled capital” includes the amount of any unpaid premium payable in respect of the issue of shares.
(3) The making of a call is, as between the shareholders affected and the company, deemed to be a proper call made by the directors.
The power is confined to uncalled capital that is charged under the security by which the receiver was appointed. Uncalled capital is a company asset, and where it forms part of the charged property the receiver may realise it like any other asset.
Under section 36, a shareholder is not liable for the company’s obligations merely by being a shareholder, but is liable for any amount unpaid on their shares. Section 265 is the mechanism that turns that liability into cash in a receivership. A shareholder who took partly paid shares is exposed.
Section 267 — sale where a mortgagee will not consent
(1) Where the consent of a mortgagee is required to the sale of property in receivership and the receiver is unable to obtain it, the receiver may apply to the Court for an order authorising the sale, either of that property by itself or together with other assets.
(2) The Court may make such order as it thinks fit authorising the sale where satisfied that —
(a) the receiver has made reasonable efforts to obtain the mortgagee’s consent; and
(b) the sale (i) is in the interests of the company and the company’s creditors, and (ii) will not substantially prejudice the interests of the mortgagee.
Under section 267(3) the order may be made on such terms and conditions as the Court thinks fit — typically, that the mortgagee’s security attaches to the proceeds in the same order of priority.
The usual case is a receiver appointed by a second-ranking chargeholder, or a receiver whose appointor holds a floating charge over the whole undertaking while a specific asset is subject to a first fixed charge in favour of someone else.
A business is often worth far more sold as a going concern than broken up. Where one mortgagee holds a single essential asset — the factory site, the plant, the fishing licence — and refuses consent, that mortgagee can block a sale that would benefit everyone. Section 267 lets the Court authorise the sale together with other assets, provided the mortgagee is not substantially prejudiced.
The test is not simply what maximises the appointor’s recovery. Paragraph (b)(i) requires the sale to be in the interests of the company and the company’s creditors — consistent with section 268(3), which requires a receiver to have reasonable regard to the interests of the company, those claiming through it, unsecured creditors and sureties.
The outer limits of a receiver’s power
- Only the property in receivership. Assets outside the charge remain under board control, and the directors remain in office.
- No power to attack past transactions. Voidable transactions under sections 340 to 347 and insolvent trading claims under section 348 belong to a liquidator.
- No power to compromise creditors’ claims generally — though a receiver of the whole or substantially the whole of the assets may propose a compromise under section 242(1)(b).
- Agency may be suspended. Once the company is in liquidation, section 280(2) allows the receiver to act as the company’s agent only with the Court’s approval or the liquidator’s written consent.
- Powers are exercised subject to duties. Every power in section 264 is constrained by sections 268 to 271, and by the section 269 duty to obtain the best price reasonably obtainable on a sale.
Section 289 adds a practical protection for the exercise of these powers: a supplier of an essential service — retail electricity, water, or telecommunications — shall not refuse supply to a receiver, or condition further supply on payment, by reason of charges due for a period before the appointment.
Sources
- Companies Act 1997 — ss 36, 231, 242, 254, 262–269, 273, 280, 289, 311, 340–348
Before relying on anything here, read the current text of the Companies Act 1997 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.