Section 14 of the Receiverships Act 1993 (the Receiverships Act) gives the receiver of a company the power to request and inspect the books, records and documents (the records) of the company from its directors. This power is very similar to that, which is given to a liquidator, by section 261 of the Companies Act 1993 (the Companies Act).
When the director of a company fails to comply with section 261, the liquidator can seek orders from the court pursuant to section 266 of the Companies Act. There is much case law surrounding the use of section 266 seeking orders against directors to inspect the records of a company. Although it happens, failure by directors to comply with section 14 of the Receiverships Act appears to occur less frequently.
It could be argued that the “counterpart” to section 266 of the Companies Act are sections 12 and 34 of the Receiverships Act. Section 12 not only provides that the director of a company in receivership should make available the company records, but also enables the receiver to seek orders from the court, requiring the director to comply with the request for company records, made by the receiver. Given that receiverships are less common than liquidations, sections 12 and 34 of the Receiverships Act have not yet been the subject of many court judgements.
The court in Tubbs v Urquhart stated that section 34(1) of the Receiverships Act entitles a receiver to seek directions from the court in the receiver’s attempts to obtain and inspect the records of the company in receivership.
In the more recent case decision of Jackson v Kerr, the court granted orders against the director of a company pursuant to sections 12 and 34 of the Receiverships Act to produce the records of the company.
We think that the process of obtaining court orders pursuant to sections 266 of the Companies Act and sections 12 and 34 of the Receiverships Act, are analogous. As a result, case law relating to section 266 and the above cases, should provide guidance to receivers when relying on sections 12 and 34 of the Receiverships Act.
Our firm’s in-house legal team means that obtaining these orders against directors and other persons in receiverships can be done in both a cost-effective and efficient manner.
In the words of Barry Ritholz: “an investment bought via credit always runs the risk of margin calls and, eventually, liquidation”. As a secured creditor, don’t wait until the end. Protect your debt and get in touch with us.