LA4540 Company Law 2

Spring Semester 2014

Tutorial 4
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Please come to the tutorial prepared to discuss the following on Duties of the Receiver:

Your client has been appointed by ABC plc (the Bank) as receiver of Building
Developments Ltd (the Company). The Companys main asset is a large development site
located in Limerick. The Company had borrowed 2,000,000 to acquire the site and a further
1,000,000 to develop the site and finance architects and advisors fees. The venture, being
in the construction section ran into a number of difficulties in light of the global financial
crisis and also as a result of ongoing litigation against the Company. This litigation concerns
legal proceedings brought by another company Better Builds Ltd who is seeking specific
performance of an alleged contract to sell the charged lands to it. The High Court held that
Better Builds did not have an enforceable contract but Better Builds Ltd has appealed to the
Supreme Court. However, the Company has recently learned that Better Builds Ltd intends
on withdrawing the appeal since, amongst other reasons, it is struggling with the ever
increasing legal costs associated with the action.

Owing to these difficulties, the Company has defaulted on its loan from the Bank and the
total indebtedness now stands at some 3,000,000. This was the reason why the Bank
appointed the receiver. Your client, the receiver, has procured valuations from two
prominent estate agents, one of which valued the charged lands at 3,000,000 and the other of
which valued the charged lands at 3,250,000.

The receiver advertised the charged lands on the market a number of weeks ago and he has
only received two serious offers in this regard. One of these offers is from a company called
Rescue Residential Ltd for 2,750,000 and the other offer is from Handy Construction Ltd
for 3,250,000 which is subject to being furnished with copies of all relevant legal
documentation in respect of the appeal and confirmation from Better Builds Ltd that the
appeal is withdrawn.

The receiver tells you that he has been contacted by James who is the managing director of
the Company and who personally guaranteed the Companys loan to the Bank. In addition to
constantly seeking information from the receiver, James also wants the receiver to accept the
offer from Handy Construction Ltd (which is subject to conditions), arguing that this way the
Companys indebtedness will be fully discharged and he will not be required to pay on foot
of his guarantee. The receiver does not want to have to gather and hand over copies of all
legal documentation regarding the legal proceedings or to have to wait for confirmation that
the appeal will be withdrawn as this can be a time-consuming and uncertain process.

Please advise the receiver as to his duties to the Company and to the managing director
James.