Introduction

The risks of a company’s properties / ongoing business being jeopardised by alleged wrongdoers (in control of management) are inherently imminent whenever a derivative action / oppression suit is filed against such wrongdoers.

A Plaintiff / Applicant in Court would ideally wish to ensure that the company’s properties or the status quo of the company are kept intact pending the disposal of the suit. This is so that in the interim, no further harms and damages can be rendered upon the company by the alleged wrongdoers to an irremediable extend.

The appointment of an interim receiver is an effective legal measure to curb and usurp such risks.

Duty Of An Interim Receiver

An interim receiver is appointed by the Court (on the application of a applicant) into a subject company to oversee the business and affairs of a company pending the disposal of an ongoing suit. The powers of the interim receiver may be as extensive as having the sole rights to sign off cheques on behalf of the company during the period of receivership.

Although an interim receiver is nominated by the applicant, he or she is deemed as an officer of the Court under the law. This is lucidly explained in the local case of Tai Kwong Goldsmiths where it was held that a receiver is an independent party to the parties in the proceedings.

A further explanation of the neutrality of a receiver’s role is set out in the U.K. case of Re a company (No 00596 of 1986) where it was noted that a receiver is appointed to “hold the ring” and he shall be free of any judgment on the rights and wrongs.

Legal Considerations

In deciding whether to appoint an interim receiver into a company, Court will take note of the following considerations:

• whether there is a good prima facie claim by the applicant;
• whether the property is in jeopardy; or
• whether irreparable mischief will be done if or
• applicants would be in a worse position if appointment of receiver is delayed.

There are myriad of cases where Courts have allowed the appointment of an interim receiver into a company pending an oppression suit. Generally, Courts recognize that the apt solution to a hostile fight between shareholders (before decision), is to pave way for a cooling period between both parties by placing a receiver into the subject company for a limited period of time. This will also prevent the ongoing dispute from disrupting the business of the company.

In the case of U.K. case of Re a company (No 00596 of 1986), the Court found fit to appoint a receiver into a company for a limited period of 3 months pending the disposal of the suit on the premise “to get matters sorted out to some degree”.

Conclusion

As stated above, the application for interim receiver into a company and the filing of derivative proceedings / oppression suit often come hand in hand. The key to such nature of application is – speed; in order to prevent the wrongdoers from further perpetrating their wrongs upon the company.

Kindly reach out to Ryan Chu & Lau Zhong Yan who have experience in interim receiver application in corporate disputes should you have any further enquiries to this topic.