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LEGAL CONSEQUENCES OF APPOINTING A RECEIVER/MANAGER

Dictum

The legal consequences of appointing a receiver/manager is that the assets which hitherto were available to the company become seised of the control of the receiver/manager and the company can only deal with assets of the company with the receiver’s consent. Consequently, the receiver/manager is regarded as the agent of the company for the purpose of dealing with assets in receivership. See K.P.M.G. Marwick Ani Ogunde & Anor –V- Vidana Nigeria Ltd & Ors (2021) LPELR – 54935 (CA). And also the provisions of Section 393 (4) of the Companies and Allied Matters Act 2020 explicitly provides that as from the date of appointment of a receiver or manager, the powers of the Director or Liquidators in a members voluntary winding up to deal with the property or undertaking over which he is appointed shall cease unless and until the receiver or manager is discharged.

– M.L. Shuaibu, J.C.A. Dekan Nig. Ltd. v. Zenith Bank Plc – CA/C/12/2020

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A RECEIVER/MANAGER IS AN ALTER EGO OF THE COMPANY

The Receiver/Manager is the alter ego of the Appellant/Company for certain specified purposes and sues in the company’s name and depending on the terms of his appointment and his status (whether he is appointed by the Debenture holden or by the Court) the Receiver may represent both the Debenture holders and/or the Appellant company.

– Oputa, JSC. Intercontractors v. National Provident (1988)

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WHEN IS A RECEIVER/MANAGER APPOINTED

Where it is necessary for the receiver to carry on the business of the company, the Court usually appoints the Receiver to be both Receiver and Manager. And a Manager is not generally appointed except to carry on the business for the purpose of selling it as a going concern.

– Oputa, JSC. Intercontractors v. National Provident (1988)

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THE APPOINTMENT OF A RECEIVER/MANAGER DOES NOT OFFEND FOSS v. HARBOTTLE

It is clear law that if owing to disputes among the directors they are unable to act and the affairs of the company cannot be carried on the court will interfere by an injunction or by the appointment of a receiver or manager of the undertaking and assets of the company until the management of the company is restored to a proper footing. See Featherstone v. Cooke (1873) L.R. 16 Ex 298; Trade Auxiliary Co. v. Vicker L.R. 76 Ex 303; and Standfied v. Gebbon (1925) W.N. 11 1925. The above principles will apply in my view in a situation where owing to disputes as to shareholdings the conduct of the affairs of a company will suffer or will be in jeopardy. In my judgment, the appointment of a receiver or manager of the undertaking and assets of a company in the situations I have just described above will not and cannot offend against the rule of Foss v. Harbottle (supra). In such a situation there is paralysis or imminent paralysis of the conduct of the affairs of the company, which the court by its intervention has to avert by the appointment of a receiver or manager for the company.

— Agbaje JSC. Okoya & Ors. V. S. Santilli & Ors. ( SC.206/1989, 23 MAR 1990)

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A COMPANY UNDER RECEIVERSHIP MUST SUE VIA THE RECEIVER/MANAGER

A company under receivership can be sued. However, if the company is to sue in order to recover or protect the property charged, it can only do so with the sanction of the Receiver/Manager by virtue of the fact that it is the Receiver/Manager that controls its assets and runs its business.

– Uwais, JSC. Intercontractors v. National Provident (1988)

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[DS] A RECEIVER MANAGER NEED NOT BE A PARTY TO THE SUIT AS HE IS AN OFFICER OF THE COURT

‘See Section 389 (1) of the Companies and Allied Matters Act CAMA A receiver when appointed by a court is not an agent of either party to the litigation. He is rather an officer of court when appointed over land, real property or corporate body. He de jure takes over possession and his appointment operates as general information against all the parties to the litigation. See Uwakwe v Odogwu (1989) 5 NWLR (pt. 123) 562. Also a receiver as such is not entitled to bring an action in his own name as receiver, this is because no property is automatically vested in him by his appointment, but he may acquire a right to sue in his own name out of his receivership but not in consequence of it alone. See Intercontractors Nigeria Ltd v U. A. C Nig. Ltd (1994) 3 NWLR (pt. 333) 481 at 490. In the case at hand, the Receiver/Manager is not required to be a party to this case before this motion or the appeal could be heard. He is an officer of the court executing the orders and powers vested on him by reason of that appointment. It is for these reasons that I hold that this leg of the preliminary objection is misconceived. The other legs of the objection could be taken together with the application … ‘It is my considered view that by the reasons of the said appointment, he is deemed an officer of the court, and not a party to the case. See Section 389(1) of the Companies and Allied Matters Act (CAMA). A receiver when appointed by a court is not an agent of either party to the litigation. He is rather an officer of court. When appointed over land, real property or corporate body he de jure takes over possession and his appointment operates as a general injunction against all the parties to the litigation. See Uwakwe v Odogwu (1989) 5 NWLR (pt 123) 562 Per Kawu and Nnaemeka-Agu JJSC at pp 576 paras E, F & G; and p 589 paras D G. Also a Receiver as such is not entitled to bring an action in his own name as receiver; this is because no property is automatically vested in him by his appointment, but he may acquire a right to sue in his own name out of his receivership but not in consequence of it alone. I refer to Intercontractors Nigeria Ltd V. U.A.C Nigeria Ltd. (1994) 3 NWLR (pt 333) 481/490. In the instant case, the Receiver/Manager is not required to be a party to this case before this motion or the appeal could be heard. He is an officer of the court executing the orders and powers vested on him by reason of that appointment. It is for these reasons that I hold that this leg of preliminary objection is misconceived.’

— M.S. Mutaka-Coomassie, JSC. Shinning Star Nig. Ltd. v. AKS Steel Nigeria Ltd. (2011) – SC. 101/2010

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APPOINTMENT OF A RECEIVER DOES NOT DISSOLVE THE COMPANY

The appointment of a Receiver/Manager does not operate as a bar to the exercise of the right of parties, other than the debenture holders, against the company in receivership; because the appointment of a Receiver/Manager over the assets and business of a company does not ipso facto dissolve the company nor make it lose its legal personality.

– Uwais, JSC. Intercontractors v. National Provident (1988)

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