A court-appointed receivership is the process of a court appointing a neutral third party (a registered liquidator) to deal with property or assets. The appointment is usually made during litigation, where relationships have deteriorated, or where a company encounters financial difficulty.
The Corporations Act (2001) Cth and the instrument of appointment regulate the exercise of a receiver’s powers.
When are court appointments effective?
Court appointments can be useful in navigating dysfunctional or adversarial relationships between stakeholders. They are also beneficial where assets are vulnerable to depletion or disposition. Court orders will vary in the powers they give to receivers to suit the unique circumstances of each case.
Who can nominate a receiver?
Either of the afflicted parties can nominate a receiver, whose role is to impartially deal with the assets in the best interest of stakeholders. Typically, either party to the proceedings can apply to the court to appoint a receiver. The court also has the discretionary power of appointment.
Can a receiver liquidate a company?
If it is fair and reasonable to do so, a receiver can apply to have the company wound up.
Different scenarios to appoint a receiver
- Divorcing co-directors and a receiver appointment
A couple were co-directors of an aviation company. The relationship broke down, and the husband filed for divorce. The aviation business became the focus of the proceedings, with both parties commencing aggressive litigation to obtain control. The court appointed a Jones Partners receiver to stabilise the entity and fairly and impartially distribute the assets between the two stakeholders.
- Feuding brothers and a receiver appointment
Two brothers and their wives operated (and resided on) a farm. The relationship between the two couples severely deteriorated, and litigation commenced, with both seeking ownership of the property. There was a strong vindictive element to the dispute, with both couples determined to control the outcome (to the detriment of the other). A receiver was appointed to sell the farm and distribute the proceedings between the parties.
Takeaway
Court appointed receivers can be highly effective at resolving complex and aggressive litigation in a timely manner that is fair for all parties. If you think this appointment could help your situation, give us a call on 02 9251 5222 for an informal, obligation-free chat.