Question

Imaging Pty Ltd (Imaging) sells health care and consumer imaging products. Big Bank has a security interest over all of the business and assets of Imaging. ​

Imaging has been struggling financially and has missed a loan repayment due to Big Bank. The loan agreement between Big Bank and Imaging provides that where there is​ a default in payment Big Bank is entitled to appoint a receiver.

On 1 June 2019 Tim is appointed receiver of Imaging. Tim decides to sell the medical imaging assets. He lists the assets on Gumtree and takes the first offer. ​Tim decides that the medical imaging side of the business is not profitable and dismisses 15​ employees.

Advise Tim as to his rights and duties as receiver.

Answer 1

Who is a receiver?

A receiver can be defined as any person who is appointed by a creditor to recover amounts due from a debtor in the event of the debtor becoming bankrupt/ insolvent. The receiver is hereby entrusted with responsibility to recover the due amount by selling off debtor's estate.

The responsibilities of the received vary from case to case basis. The terms of their engagement are laid out according to the terms of the charge/ deed. In case the receiver is entitled to act as an administratior of the debtor's management of business operations, the receiver can exercise undue priviliges to carry out the funtions of the debtor's enterprise.

In the given case, Imaging Pty Ltd ("Imaging") has been struggling financially and has missed a loan repayment due to the Big Bank. Since, the loan agreement between Big Bank and Imaging provides appointment of a receiver, the bank has appointed Tim who then decides to sell assets of Imaging to recover the dues. Going forward, Tim ​decides to dismisses 15​ employees, since he considers that the business is not profitable.

The appointment of a receiver does not automatically terminate the employment of the company’s employees. As a result, since the receiver has taken full responsibility with regards to operations and affairs of a business, he may, if need be, dismiss employees.

The receiver is entrusted with the following roles and responsibilities:

• collecting debts due to the company;
• recovering property owned by the company;
• carrying out the business of the company
• creating or terminating leases of company property;
• commencing or continuing litigation on the company's behalf;
• carrying on the company's business
• selling the company's assets
• take decisions for proper administration of the company's busines