Where a receiver is appointed on foot of a floating charge, then sections 319 and 320 of the Principal Act require the company to provide the newly appointed receiver with a statement of company affairs and, in turn, require the receiver to forward a copy of the statement to various parties, including the Registrar of Companies, together with any comments he sees fit to make thereon.
Section 320 provides that the statement must show, on the date of the receiver's appointment, the company's assets, debts and liabilities; the names and addresses of its creditors; the securities held by, and when given to, those creditors and such other information as may be prescribed.
CRO Form 17 prescribes in precise manner the information to be prepared pursuant to these sections. This includes, at List E, details of unsecured creditors. The main obligation to prepare and verify this statement rests on the company directors and secretaries but the receiver is empowered to require past and present company officers, promoters and employees to provide information. Receivers have been lax in complying with the requirement of filing the statement with the registrar of companies, the excuse offered being that the statements are not being submitted to them in the first place. To encourage officers to discharge their responsibilities more substantial penalties can now be imposed for failure to comply by virtue of section 148 of the present Bill.
As a fall-back position, section 149 provides that, even if the directors, or failing them, the secretary or other responsible persons of the company, do not, as they should, prepare a statement of affairs somebody will. As presently proposed the statement the receiver would be required to prepare is identical to that required by section 319 (1). However, it must be said that the primary responsibility to prepare the statement will remain on the company's officers.
I can understand the reasons behind the Deputies' amendment, the effect of which would be to reduce the amount of information that a receiver would be required to include in the statement of affairs. However, I have to say straightaway that the information which the receiver would have a duty to include in the statement is information that the receiver should himself obtain to fully assess the position of the company. To accept this amendment would considerably reduce the value of requiring the preparation of the statement of affairs by the receiver where the company officers had failed to do so in the first place.
Even though a company goes into receivership existing suppliers may continue to supply products to the company in the hope and expectation that the receiver will be able to keep the company going and eventually sell it as a going concern. One basis on which they can make an informed decision as to whether to continue supplies would be where they have available to them a statement showing the extent of the company's indebtedness, which would give a pointer as to the eventual outcome of the receivership. Reducing the amount of information, as proposed by the Deputies, would render the information available less usable than otherwise.
Granted there may be receiverships where, on first examination, it appears that the liabilities of the company in question are so much greater that the assets that the chances of making any payment whatsoever to the creditors, and particularly the unsecured ones, is very remote. In such cases, the question must be asked whether the time and effort, not to mention the cost, involved in preparing the statement would be out of proportion to the use the information can be put to at the end of the day. The way I see it is that to properly assess the circumstances of the company to which he is appointed, a prudent and diligent receiver should obtain full details of the company's liabilities, and I am happy that the present fall-back position requiring, as it does, the preparation of a full statement of the company's assets, debts and liabilities by the receiver is necessary and must be maintained.
In the circumstances I would not be happy to reduce the information available in the way provided for in the Deputies amendment.