The appointment of a receiver is necessary for a company under liquidation in order to safeguard and keep its property and assets, who will act for the benefit of the persons having interest in the property and his primary duty will be to collect and distribute the company’s assets.
When the Court orders the liquidation of a company, it appoints by law the Official Receiver to act temporarily as the receiver of the company. He has the power and the duty to obtain a relevant declaration from the directors and the secretary of the company regarding its affairs, details of assets, debts and liabilities, names of creditors, securities and any other information necessary.
Where there is no compliance by the company’s officials, the Receiver has the power and the right to apply to the Court for the issue of an order enforcing them to comply. Within reasonable time and when it is practical, the Official Receiver prepares and submits to the Court a provisional report regarding the reasons for the insolvency, an estimate of the capital assets and liabilities, whether an investigation is necessary to be conducted with regard to the business affairs and the insolvency or whether it is desirable for any other issue to become known to the Court. Additionally, he calls meetings of the creditors and contributors of the company in order to decide on whether an application will be filed with the Court for the appointment of a receiver who will act in lieu of him.
The powers vested by the law in the receiver are mainly the following:-
The receiver of a company under liquidation by a Court order, during the management and distribution of its assets, takes into account the instructions from its creditors and contributors and he can call general meetings to establish their wish. Moreover, he can apply to the Court for directions regarding any matter arising during the liquidation. He is under the supervision of the Official Receiver to whom he must give an account with all the relevant documents.
The issue of whether the receiver has the right to file an application to the Court for an order suspending the liquidation proceedings was examined recently by the Court. It was decided that only the creditors, contributors and the company itself have such a right but not the receiver.
The Supreme Court held that the powers of the receiver cannot be extended in order to question, on behalf of the company, an application for its liquidation, since this would overcome the powers of the directors to object. When the receiver wishes to object to an application for the liquidation of the company, the person who can do so is the creditor who appointed him and not the receiver himself.
A receiver who appears to object to such an application without having this power under the law, could be considered either as representing the creditor who appointed him or that he is acting as a creditor himself for his expenses regarding the liquidation. It was stated that this should be seen from the actual status of the receiver who primarily seeks to serve the interests of the creditors who appointed him. The directors of the company are left with residual powers, including the ability to sue the creditors who appointed the receiver.
George Coucounis is an experienced lawyer practicing in Larnaca, Cyprus.
Educated at University College (London) and Thessaloniki University (Greece), George is fluent in English and has been practicing law in Cyprus since 1982.