Milsted Langdon insolvency partner Simon Rowe explains how the use of court-appointed receivers helped solve a complex divorce breach
A case in the courts recently saw an individual have his assets, including freehold property and shares in his wholly-owned limited company, placed under the responsibility of Milsted Langdon acting as a court-appointed receiver, after he was found in breach of the terms of his divorce order by consistently failing to make the payments prescribed within it.
During the case Simon, who heads up Milsted Langdon’s specialist corporate recovery and asset realisation team, demonstrated that the firm had the experience and expertise to take control of a significant trading enterprise in order to satisfy the payments prescribed following the couples’ divorce.
The appointment of a court receiver remains fairly uncommon and the courts tend to be cautious about taking such a draconian approach, which effectively deprives an individual of his assets, especially where a trading business is involved.
The court will be more likely to grant the order if the assets over which the receiver is being appointed to manage are clearly specified.
Conversely judges are likely to be reluctant to appoint a receiver simply over all the assets of the subject of the court order if they suspect that the appointment amounts to a fishing exercise.
The power of a court-appointed receiver is fairly wide-ranging and allows them to remove the entire board of directors and replace them with alternative nominees.
Often the mere threat of having a receiver appointed can be enough to persuade defaulting litigants to comply with their obligations.
The critical issue is to ensure that the former shareholder who has been divested of their assets by virtue of the receiver’s appointment has as few opportunities as possible to undermine the receivership.
These types of cases often involved emotional parties and said that the preferred outcome was for the debtor to realise that the loss of an asset was too great and not worth the trouble of not meeting the original court order.
To ensure the best results for the creditor it is important that the court order by which the receiver is appointed is properly drafted. It should include sufficient provisions to give the receiver the powers required to undertake the receivership efficiently.
Court receivers do not have recourse to the powers contained within the Insolvency Act 1986 that are available to administrative receivers and the like, which is why it is critical that the order affords enough power to cope with as wide a range of future contingent scenarios as possible, such as the right to sell shares.
Many family lawyers see the appointment of a court receiver as prohibitively expensive and yet the reality is that the courts have to approve the costs, which can be kept proportionate to the value of the assets at stake.
Often the receiver’s task is simply to take control of the assets and to realise them. In this case we were able to help the creditor realise the conditions of their order through our actions.
This latest case has helped to establish the use of court-appointed receiverships in relation to obtaining assets through existing court orders and he hopes his work will act as a guide to the courts and others in future.
About the author
Simon Rowe is an insolvency partner at Milsted Langdon.