When companies become insolvent in The Bahamas, the court may create receiverships to handle the companies' business as they are wound up. A receiver is one of several possible court appointees who could help manage a company during an insolvency proceeding.
Companies become insolvent when they cannot pay their debts on time or have liabilities that exceed their assets. In The Bahamas, insolvent companies may need to wind up. This means that the companies will liquidate assets to pay creditors. Once this process is complete, the companies will be dissolved.
What are a receiver and a receivership?
A receiver receives income from property of a company, pay the liabilities connected with the property, and realizes any security interests of creditors on whose behalf he or she is appointed. During a legal winding up process, the court can give the receiver other duties too. Sometimes a receiver is also appointed manager of the company, and he or she manages property owned by an insolvent company for the benefit of the creditors. If the court so orders, the receiver potentially may sell off parts of the company's property, or perhaps rehabilitate its line of business so it can be sold. This relationship between receiver and company is called a receivership.
A receiver acts similarly to a liquidator or trustee, in that all have some right to manage or assess property during a legal proceeding. Which person to appoint depends on which kinds of assets need to be marshalled and distributed to pay debts.
When is a receiver appointed?
A receiver is appointed by the court if a creditor or other interested party requests it. Often, this happens after a company becomes insolvent, during a winding up proceeding.
Generally, the court may appoint a receiver if the company is not solvent, if the company is already being liquidated, or for other reasons that appear just and equitable. The court must agree that appointing a receiver would assist with orderly management, sale, or winding up of the company, or distribution of company assets to creditors.
How can you get advice on receivers and receiverships?
If you are a company facing insolvency in The Bahamas, or if you are involved in receivership of a property or business, you may need legal advice. Seek out a lawyer who is knowledgeable about receivers and liquidators to learn about your rights and responsibilities.
To find out more about receiverships, visit Gonsalves-Sabola Chambers online or call the office at +1 242 326 6400.