A receiver can run the business in Ontario if the appointment order gives it managerial authority. Rule 41.03(c) requires the order to state whether the receiver is also appointed as manager and, where necessary, define the scope of the receiver’s managerial powers.
Does Every Receiver Have Management Powers?
No. A court-appointed receiver does not automatically receive unlimited authority to operate the debtor’s business. The starting point is the appointment order.
Ontario Rule 41.01 defines “receiver,” for Rules 41.02 to 41.06, to include a receiver or receiver and manager. Rule 41.03(c) then requires an order appointing a receiver to state whether the receiver is also appointed as manager and, if necessary, define the scope of the managerial powers granted.
The Bankruptcy and Insolvency Act also gives the court broad jurisdiction over business operations in a federal receivership. Under BIA s. 243(1)(b), the court may authorize a receiver to exercise any control it considers advisable over the receivership property and over the insolvent person’s or bankrupt’s business.
The result is that the label “receiver” alone does not tell stakeholders how much operational control has shifted. The actual order must be reviewed to determine whether management powers were granted and how far those powers extend.
For the related question of asset control, see What Property Can a Court-Appointed Receiver Take Control of in Ontario?.
What Can a Receiver-Manager Do?
Where managerial authority is granted, the appointment order may permit the receiver to continue some or all business operations while the receivership proceeds. Depending on the wording of the order, those powers may include:
- continuing ordinary business operations;
- dealing with employees, suppliers, customers, and contractors;
- collecting revenues and receivables;
- maintaining bank accounts and making authorized payments;
- preserving, repairing, or insuring business assets;
- retaining lawyers, accountants, agents, or other professionals;
- managing contracts or operational relationships; and
- taking steps toward a restructuring, realization, or sale process where authorized.
These powers are not identical in every receivership. The court may give a receiver broad managerial authority where continued operations are expected to preserve enterprise value, or a narrower mandate where the purpose of the receivership is primarily asset preservation and realization.
Management authority also does not displace the receiver’s obligation to remain within the appointment order. If a proposed step is outside or unclear under the existing mandate, the receiver may seek directions from the court under Rule 41.05. Disputes over whether the receiver has gone beyond the powers granted can become a separate contested issue.
How ME Law Approaches Receiver-Management Disputes
ME Law approaches receiver-management issues by comparing the proposed or existing conduct against the actual appointment order, the BIA, the Rules of Civil Procedure, and the relevant security and operational documents. We examine whether the receiver was expressly given managerial authority, which business functions were transferred, and whether a contested decision falls within that mandate.
Where authority is disputed, our Scope of Receiver Powers Disputes practice addresses challenges to the reach of the receiver’s mandate. Broader disputes involving continued operations, court directions, realization, or stakeholder objections fall within our Receivership Litigation & Court-Appointed Enforcement Lawyers practice.
Contact ME Law to request a consultation.