Question 3: Receivership Ernies Engineering Ltd (EE) wishes to extend its manufacturing arm. In order to do so, it needs to borrow money. We Fund You Ltd (WFU) agrees to loan money to EE. WFU is concerned that the venture might be risky, so it includes a term in the agreement that the loan will be secured by way of a debenture. The contract provides that WFU could appoint a receiver if EE misses two or more payments due to WFU.

a. In March 2021, EE misses a payment due to WFU. WFU is concerned, as they know that EE is planning on selling one of its factories in order to pay other creditors. Explain whether WFU can appoint a receiver. (Word count guideline: 100 words)

b. Explain what a receiver does and name the statute that regulates their role. Citing any relevant statutory provisions, explain who can act as a receiver. (Word count guideline: 100 words)

c. WFU is aware that EE has a good reputation in the market and that the business might be saved. They have heard that there are two types of receiver that might be appointed. Identify the two different types of receiver and explain which form of receiver they are likely to appoint. (Word count guideline: 100 words)

d. One week before the receiver is appointed, EE finds itself unable to pay its electricity bill. The electricity company sends a demand to the receiver saying that, if the bill is not paid within five working days, it will cut off electricity. The demand refers to clauses in the contract between EE and the electricity supplier which allow it to cut off electricity if it is not paid on time. Citing the relevant statutory provisions, explain whether the electricity supplier is entitled to cut off electricity. (Word count guideline: 75 words)

e. Citing the relevant statutory provision, identify the two key overarching duties of the receiver. (Word count guideline: 100 words)