What is an Interim Receivership?
An Interim Receivership is a remedy available under the Bankruptcy and Insolvency Act for the purpose of protecting the assets of a company (also known as “Debtor”) that is undergoing an insolvency process.
The Court may appoint an Interim Receiver following the filing of:
- an application for a Bankruptcy order but prior to the date of Bankruptcy;
- a Notice of Intention to File a Proposal;
- a Proposal; or
- a Notice of Intention to Enforce Security by the secured creditor, where there is concern that the debtor’s assets will dissipate.
An Interim Receiver is only appointed when there is evidence that the debtor’s assets are in jeopardy and the appointment is necessary for the protection of the debtor’s estate. An Interim Receiver is an officer of the Court and generally acts as a custodian on behalf of a creditor(s). An Interim Receiver is a distinct and separate function from a Receiver.
The duties, powers and role of the Interim Receiver are set out in the court order that authorized its appointment. An Interim Receiver’s duties and powers may include taking possession of the assets or a portion of the assets, controlling the receipts and disbursements of the debtor, being the custodian of the assets, taking conservative measures to protect assets; and disposing of property that is perishable or likely to depreciate rapidly in value. The Interim Receiver can also, with permission of the Court, make advances, incur obligations, borrow money, and provide security on the property of the debtor. The Interim Receiver will not, however manage or carry on the debtor’s day-to-day business.
An Interim Receiver is appointed on a temporary basis. Its appointment will end on the earlier of: the appointment of a Receiver by a secured creditor, court approval of a Proposal filed by the Debtor, the appointment of a Trustee of a bankrupt company, or 30 days after the date of the Interim Receiver’s appointment, unless the court specifies a different period.
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