Campbell, Saunders Ltd. has acted as a privately appointed or Court-appointed Receiver or Receiver Manager (“Receiver”) on behalf of banks and private lenders for hundreds of companies and in a variety of industries.
A secured lender or creditor may appoint a Receiver pursuant to the terms of a General Security Agreement (“GSA”) granted by the debtor to the lender which captures all of the security or assets of the debtor. A Receiver may also be appointed by the Court.
Before a Receiver is appointed, the secured creditor must provide the debtor with a minimum of 10 days’ statutory notice (i.e. a Notice of Intention to Enforce Security) pursuant to the provisions of the Bankruptcy and Insolvency Act (“BIA”) to allow adequate time for the debtor to repay its indebtedness.
Only after the expiry of the minimum 10-day period can a secured creditor enforce its security. At any time prior to the expiry of the 10-day Notice, a debtor is able to file a Notice of Intention to Make a Proposal (pursuant to the BIA) to its creditors, which would stay and prevent a secured creditor from enforcing its security for an initial 30-day period.
Pursuant to the terms of most GSA’s, the Receiver is appointed to take possession and secure the debtor’s 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 does not receive cooperation from the debtor and makes an application to the Court for such an appointment.
The Receiver acts primarily for the secured lender but also has a fiduciary duty to the debtor and all of the debtor’s stakeholders. The Receiver must act in good faith, preserve and secure the assets of the debtor and maximize the realization of the assets. The Receiver is not obligated to continue with the operations of the debtor if it is not financially reasonable. Once the secured lender has been repaid its debts and related costs, any remaining assets are returned to the debtor.
A secured creditor will often send a demand to the guarantor of the corporate debt, if applicable, at the same time. If you or your Company has received a Notice of Intention to Enforce Security from a secured lender, you should immediately consult with one of our insolvency professionals. Otherwise, the ability for you to restructure your business may be severely limited.