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APPOINTMENT OF A RECEIVER DOES NOT DISSOLVE THE COMPANY

Dictum

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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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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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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LEGAL CONSEQUENCES OF APPOINTING A RECEIVER/MANAGER

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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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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RECEIVER/MANAGER IS AN AGENT OF THE COMPANY AND CAN TAKE EFFECTIVE STEPS FOR THE COMPANY

In M. Wheeler and Company Ltd. v. Warren (1928) Ch. 840, the Debenture deed provided for the Receiver/Manager to get in the property charged by the debenture. When there was a default in the terms of the debenture, the debenture holder appointed a receiver. The receiver issued a writ in the name of the company. A preliminary objection was taken by the Defendant seeking to set aside the writ on the ground that the receiver had no power to commence an action in the name of the company. Lord Hornworth M.R. after referring to the words of clause 6, sub-clause 1, similar to clause 1 in this case, and observing that it is not expressly stated that the receiver is to have power to use the company’s name for the purpose of bringing proceedings, stated that it is provided that the receiver “shall be the agent of the company and shall have power….to take possession of and get in the property hereby charged” at p.844 construed this to mean and I entirely agree, “… that as the getting in of the property charged is to be done by the receiver and the property is vested in the company, he must have power to get in the property in the only way possible – namely, by bringing action in the name of the company. The fact that he was made the agent of the company and given power to get in the property charged, is in my opinion sufficient to give him power to take the only effective steps in the name of the company.”

– Karibi-whyte, JSC. Intercontractors v. National Provident (1988)

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THE APPOINTMENT OF A RECEIVER IS A MATTER OF DISCRETION

In Viola v. Anglo-American Cold Storage Company (1912) 2 Ch. 305, Swinfen Eady J, gave what is acceptable as the reason why leave of the Court is necessary for a receiver to institute or defend actions whether the appointment of Receiver/Manager is by court or under a debenture-holder’s deed. He said at pp.310-311. “It is however, well settled that in a mortgagee’s action where a receiver and manager has been appointed it is for the court to determine whether proceedings shall be taken at the expense of the mortgaged property. The receiver cannot do this of his own initiative, but would run the risk of his cost being disallowed if he did not obtain the direction of the Court (see Bristowe v. Needham (1847) 2 Ph.190 and Wynn v. Lord Newborough (1790) 3 Bro. C.C. 88, and neither mortgagor nor mortgagee has any absolute right to insist upon an action being brought or to prohibit it being brought by the receiver at the expense of the mortgaged property. The appointment of a receiver is a matter of discretion to be governed by the circumstances of the case; see Lord Truro’s judgment in Owen v. Homan (1851) 3 Mac & G, 378, 412. It is made in the first place for the protection of the estate and for the benefit of all concerned, and in sanctioning the receiver taking proceedings the court has regard to what it considers right and proper in the interest of all parties.”

– Karibi-whyte, JSC. Intercontractors v. National Provident (1988)

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