How much power does a Court Appointed Receiver have?
Should a Court Appointed Receiver's powers be restricted or extended?
Court Appointed Receivers over Partnerships only obtain their powers from the wording of the order under which they have been appointed. Therefore when a solicitor applies to court on behalf of one of the Partners to appoint a Court Appointed Receiver much thought needs to be given to the powers which the Receiver will need to have.
We have seen some cases where minimal powers have been granted under the Court Order of appointment which may result in the process becoming more costly for the Partners concerned. This is because once a Court Appointed Receiver has been appointed those Receivers may be unable to promptly achieve the objectives of the receivership owing to the limited wording of the Court Order - resulting in too few powers having being given to the Receiver of the Partnership. Becase of this before applying for the appointment of a Court Receiver we recommend that you dicuss the position with us in order that a comprehensive Order is requested which will provide the Receiver appointed wth all of the necessary powers to achieve the objective(s).
In the absence of a comprehensive initial Court Order the Receiver may then have to make a further application to court, incurring more costs, to extend their powers. Some of the questions which need to be asked by Partners when considering how to word the proposed Application for the Order of appointment include:
1. Is the purpose of the Receiver's appointment to realise some or all of the partnership assets and split the money raised - but have no responsibilty for trading in the interim period? If so, how is it envisaged that that trading is to be monitored? How are trading decisions to be made and who will make those decisions?
2. Is the Court Appointed Receiver responsible for trading the Partnership? If so does the Receiver have the power to dismiss partners and staff? Is the Receiver the only cheque signatory? Can the Receiver close some business units?
3. Is the Court Appointed Receiver responsible for selling the Partnership as a going concern (as opposed to just selling off the fixed assets and realising the debtors and work in progress?
4. What powers are needed to achieve the purpose of the court order?
5. Is it appropriate to apply to court to have Receiver empowered to the same level as an Administrator? A list of an Administrator's general powers can be found at Paragraphs 59-64 of Schedule B1 Insolvency Act 1986 and at Schedule 1 to the same Act..
6. Should a Court Appointed Receiver be given power to reclaim money from a Partner found to have drawn out money from the Partnership (improperly or otherwise)? [In a particular case we had to obtain a world wide freezing order against the private assets of a particular partner]
7. Should a Court Appointed Receiver have the power to recover fees on a time costs basis, and recover disbursements?
This is only a basic list of some of the questions which must be considered when thinking of applying for a Court Appointed Receiver to a partnership as to the powers it would be necessary for the receiver to have.