Ms Helen Curley:

I thank the Chair and wish the committee a good morning. I am a principal officer in the company law unit of the Department of Business, Enterprise and Innovation. To my left is my colleague, Ms Tara Coogan, who is also a principal officer in the Department. I thank the committee for this opportunity to address issues concerning the governance and regulation of receivers in the context of the Companies Act 2014.

At the outset, as Mr. McKenna has emphasised, it is important to state that the principal source of law relating to receivership is contract law. Receivership is a long-standing legal mechanism for the enforcement of security. By far the most common method of appointment of a receiver is under the power contained in a debenture. A receiver is an appointed person whose duty is to receive a debtor’s assets and property for and on behalf of a creditor who is entitled to take them in satisfaction of the debtor’s obligations, pursuant to a written agreement. Parties to the contract, for example a company and a lending institution, agree that one of the terms on which the company borrows money is that, in the circumstances specified in the agreement, the lending institution can appoint a receiver over its assets. The parties have freedom to contract and agree contractual terms, including in respect of the appointment of a receiver.

While the terms on which a receiver can be appointed may vary from one debenture to the next, according to Forde, Kennedy and Simms's The Law of Company Insolvencythey generally include the following events: whenever the principal sum due under the agreement becomes payable; whenever the company fails to pay any instalment, or the principal sum or the interest due under the agreement; whenever the company contravenes covenants in the security instrument; whenever the company ceases or threatens to cease its business; whenever a resolution is passed, a petition presented or an order is made to wind up the company; whenever the company acts in such a way as to jeopardise the security created by the debenture; and whenever any prior debenture becomes enforceable against the company.

There are advantages to a contractual receivership as it avoids the need for the debenture holder to go to court to enforce the security and therefore saves costs; costs which the debtor would have to pay. Receivers may also be appointed under specific statutory powers such as that contained in the Land and Conveyancing Law Reform Act 2009 or by the High Court under its equitable jurisdiction under the Supreme Court of Judicature Act (Ireland) 1877. Where a receiver is appointed by the High Court, his or her powers will be dependent on the court order of appointment.

A receiver’s primary duty is towards the debenture holder who has appointed him or her. Receivers will generally have the power to sell the secured assets with a view to paying off the debt owed to the debenture holder. A receiver-manager will often have the power to carry on the business of the company, to borrow money, to employ or dismiss employees, to compromise debts of the company and to insure and repair property.

Section 437 of the Companies Act 2014, which I will refer to subsequently as “the Act”, confers statutory powers on receivers of the property of a company to do certain things and is intended to alleviate many of the problems which may arise from poorly drafted debentures. Examples of these things include the power to enter possession and take control of property of the company; to lease, let on hire or dispose of property of the company; to grant options over property of the company on such conditions as the receiver thinks fit; to borrow money on the security of property of the company; and to repair, renew or enlarge property of the company.

It is important to point out that these powers are subject to any provision in the instrument under which the receiver was appointed which limits the receiver’s powers in any way, again underlying the essentially contractual nature of receivership. For example, if the agreement provided that the receiver was not to borrow money, the Act would not prevail over that restriction.

A receiver is very different from a liquidator or an examiner. A liquidator has the task of winding up a company, realising its assets and distributing those assets in accordance with the law. An examiner is appointed for the purpose of examining the state of the company’s affairs and to put together some compromise or scheme of arrangement which may facilitate the survival of the company and then reporting to the court. A receiver, appointed on foot of a debenture, has a much narrower function. His or her principal task is to secure the assets of a company which have been mortgaged or charged in favour of the debenture holder which appointed him or her and realise those assets so that the secured creditor’s debt is repaid as quickly and efficiently as possible.

The Act sets out a number of duties that a receiver must comply with. Of these duties one of the most often cited is that a receiver, in selling the property of a company, must exercise all reasonable care to obtain the best price reasonably obtainable for the property as at the time of sale. This statutory duty makes it imperative that the receiver obtains expert legal and valuation advice on the sale of property, consistent with that duty. In addition, he or she must give notice to the company’s creditors if he intends to sell by private contract a non-cash asset of requisite value to an officer of the company.

There are provisions relating to the regulation and governance of receivers of the property of a company in the Act. The following are illustrative examples. When a receiver is appointed the Registrar of Companies must be notified within seven days of the appointment and must also be notified when a receiver ceases to act. In addition, every business letter, order for goods, or invoice issued by or for the company or the receiver must state that a receiver has been appointed. Failure to comply with these requirements is a category 4 offence, which is the most minor type within the fourfold classification of company law offences set out in section 871 of the Act.

The Act provides that the receiver must make certain information available to the company and to the Registrar of Companies. In addition, there is an obligation on receivers to send periodic accounts to the Registrar of Companies. Breach of the requirements is also a category 4 offence. A receiver must also report to the Director of Public Prosecutions and to the Director of Corporate Enforcement if it appears to him or her that a past or present officer or member of the company has been guilty of an offence in respect of the company.

Section 433 sets out the categories of persons who are disqualified to act as the receiver of a company, for example an undischarged bankrupt, an employee or officer of the company concerned, or a person who was such within the period of 12 months before the date of the commencement of the receivership. Certain specified family members of an officer of the company concerned are also disbarred. A body corporate cannot be a receiver of the property of a company.

Section 444 of the Act allows a liquidator, a creditor or a member of a company to apply to the High Court for an order to fix the amount to be paid to a receiver, notwithstanding that his or her remuneration has been fixed by the instrument appointing him or her.

Section 446 of the Act provides that the Director of Corporate Enforcement may, where he or she considers it necessary or appropriate, request that the receiver produce to the director the receiver's books for examination, either in regard to a particular receivership or to all receiverships undertaken by the receiver. Failure to do so is a category 3 offence. The court may, on cause shown, remove a receiver and appoint another and may end or limit a receivership on the application of a liquidator.

That is the end of my initial presentation. I thank the committee for its attention. We will be pleased to address any questions on the governance of receivers in the context of the Companies Act 2014.