A Receiver or Receiver-Manager (“Receiver”) may be appointed by a secured lender under a General Security Agreement (“GSA”) covering all of the security of the debtor, under a specific mortgage such as a mortgage of an office building or apartment block, and may be appointed by the Court.

In the most common form, a receivership that is pursuant to a GSA, the Receiver is appointed to take possession of the assets, to manage them in such a manner that provides the secured lender will be paid out, or to liquidate them for the same purpose.  A receiver can also be appointed by the Court when the secured creditor makes an application for the appointment.

The Receiver acts primarily for the secured lender, but also has a fiduciary relationship to the debtor. The Receiver must act in good faith and preserve the assets of the debtor, but is not obligated to consider the long term objectives of the debtor. If the Receiver can realize sufficient funds to pay out the secured lender in the short term, then the Receiver will most likely be there only for the short term. Once the secured lender is paid out the surplus assets are returned to the debtor to be managed by its directors.

Before the secured creditor can call your loan and appoint a Receiver, it must provide you with statutory ten day Notice of Intention to Enforce Security pursuant to the provisions of the Bankruptcy and Insolvency Act.

Only after the expiry of the 10-day period can the secured creditor enforce its security. Prior to the expiry of the 10-day Notice, your Company would be able to file a Notice of Intention to File a Proposal to Creditors, which would stay the secured creditor from enforcing its security for a 30-day period.

If your Company receives the ten day notice from your bank or secured creditor, it is essential to consult with our insolvency professionals immediately. Otherwise the ability for you to restructure your financial affairs may be severely limited.