The property a court-appointed receiver can control depends on the appointment order and governing statute. Under BIA s. 243(1), the court may authorize possession or control of all or substantially all business property of an insolvent person or bankrupt, including inventory, accounts receivable, and other business property.
What Property Can Be Included in a BIA Receivership?
Under s. 243(1)(a) of the Bankruptcy and Insolvency Act, the court may authorize a receiver to take possession of all or substantially all of the inventory, accounts receivable, or other property of an insolvent person or bankrupt that was acquired for or used in relation to the business.
Section 243(1)(b) also permits the court to authorize whatever control it considers advisable over that property and over the insolvent person’s or bankrupt’s business. Section 243(1)(c) gives the court additional authority to permit other action it considers advisable.
The statute therefore creates a broad potential scope, but a receiver does not automatically obtain control of every asset merely because a receivership order has been made. The appointment order is critical. It identifies the property subject to the receivership and defines the powers the receiver may exercise.
Depending on the business and the wording of the order, receivership property may include inventory, accounts receivable, equipment, bank accounts, business records, contractual rights, real property used in the business, proceeds of assets, and other business-related property. Whether a particular asset is captured may depend on the debtor’s legal interest in it, the security documents, the appointment order, and competing ownership or priority claims.
For the broader role of the remedy, see What Is a Court-Appointed Receiver in Ontario?.
What Can the Receiver Do With the Property?
Depending on the appointment order, a receiver may be authorized to:
- take possession of specified business property;
- secure, preserve, or insure assets;
- collect accounts receivable and other amounts owing to the debtor;
- operate or manage the business where the order permits;
- access books, records, systems, and information needed to administer the receivership;
- realize or sell assets where authorized, subject to further court approval where required; and
- protect or preserve proceeds generated from receivership property.
Ontario Rule 41.03 reinforces the importance of the appointment order. Where a receiver is also appointed as manager, the order must state that fact and, where necessary, define the scope of the receiver’s managerial powers.
Two receiverships can therefore involve materially different levels of control even when both arise within the same statutory framework. One order may focus on particular collateral or operations, while another may give the receiver extensive control over substantially all of the debtor’s business property and operations.
The question of what property the receiver may control is also distinct from whether the receiver should have been appointed at all. That threshold is addressed separately in What Test Does the Court Apply on a Receiver Appointment Motion?.
How ME Law Approaches Disputes Over Receivership Property
ME Law approaches disputes over receivership property by starting with the exact wording of the appointment order, the BIA, the security documents, and the debtor’s ownership interests. We identify which assets are clearly within the receiver’s mandate, which are disputed, and whether third-party ownership, trust, priority, contractual, or other rights limit the receiver’s control.
Where the dispute concerns whether a receiver has exceeded or misunderstood its mandate, our Scope of Receiver Powers Disputes practice addresses the reach and limits of receiver authority. Broader court-supervised enforcement disputes fall within our Receivership Litigation & Court-Appointed Enforcement Lawyers practice.
Contact ME Law to request a consultation.