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Receivership Problem Question

  • 28-04-2010 6:11pm
    #1
    Viarum
    Registered Users, Registered Users 2 Posts: 21 ✭


    hey folks,

    just going through a typical receivership problem question for a company exam in a few weeks. i've reasonable idea where things stand, however, i'll paste it up and see what issues people can spot. hopefully there's something else that I haven't noted yet. Many thanks for the time!

    X ltd., an Irish company, created a debenture in favour of AUB, a bank, in respect of a loan of €2,000,000 which it received from AUB for acquiring machinery. The debenture gave AUB a charge over X’s business premises and the power to appoint a receiver in the event of default on the loan. As the principal shareholder and managing director of X, Alan was required by the bank to provide a personal guarantee in respect of the loan. Unfortunately recession has hit the company hard in the twelve months since the debenture was created and the bank has appointed a receiver. Alan asked the receiver for information relating to the proposed sale of its premises but no response was received. He subsequently heard that the receiver intends to sell the premises for €500,000. Alan was of the view that the property was worth far more than that. He also thought, when he heard the news, that if it was not possible at that time to find someone who would pay more, that the receiver should wait for another six months by which time it was hoped that the company would have obtained planning permission for developing the premises, which would significantly increase the value of the site. Alan heard yesterday that the premises are to be sold for €500,000. He and the board of directors of X agree that the company will seek to bring court proceedings to prevent the receiver from going through with the sale. A letter is sent by X to the receiver informing him of the company’s intention to take legal proceedings.


    Advise the receiver on his duties to the company, to Alan as the guarantor of the loan, and on the possibility of the company taking legal proceedings to prevent the sale going ahead. Your answer should refer to relevant case law and legislation.


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