As the Abu Dhabi Global Market (ADGM) cements its role as a leading international financial center, stakeholders are increasingly turning to its robust common law framework for creditor protection and asset enforcement. One of the most effective tools available within this framework is the appointment of a receiver by the ADGM Court.
Often misunderstood or underutilised, court-appointed receivership serves as a highly adaptable remedy in complex commercial disputes, fraud cases and enforcement scenarios.
This article outlines the legal foundation for receivership under ADGM law, practical considerations for its use, and the advantages it offers in safeguarding or realising value in distressed or disputed situations.
Court-appointed receivership in the ADGM is primarily governed by the ADGM Courts, Civil Evidence, Judgements, Enforcement and Judicial Appointments Regulations 2015 (the “ADGM Courts Regulations”) and ADGM Court Procedures Rules 2016 (the “CPR”) supplemented by Practice Direction 10 on Enforcement and underpinned by the ADGM’s application of the English Law Regulations 2015 (the “ADGM Law Regulations”) which provide that: “the common law of England (including the principles and rules of equity), as it stands from time to time, shall apply and have legal force in, and form part of the law of, the Abu Dhabi Global Market”.
In the case of AC Network Holding Ltd v Polymath Ekar SPVI [2023] ADGMCA 0002, the interpretation of the ADGM Law Regulations by the ADGM Court of Appeal (the ADGM’s highest court) confirmed that English common law precedents are directly enforceable within the ADGM, ensuring predictability of the ADGM court’s and allowing investors and creditors to have confidence that in distressed situations, where they may resort to the appointment of a court-appointed receiver as a remedy, they can rest assured that the matter will be handled in a manner consistent with English law precedent.
Appointment of a Receiver, circumstances and conditions
As per the ADGM Courts Regulations the court may appoint a receiver in all cases in where it appears to the court to be “just and convenient to do so” and such an order may be made unconditionally or on such terms and conditions as the Court thinks just providing wide discretionary powers.
Court-appointed receivership is a judicial remedy that offers great flexibility and scope, particularly in cases of:
- Alleged fraud or misappropriation;
- Shareholder or boardroom deadlock;
- Contested enforcement of security;
- Risk of asset dissipation; and
- Ongoing insolvency or restructuring proceedings.
The court also has the power to appoint a receiver by way of equitable execution in relation to all legal estates and interests in real property whether or not a charge has been imposed on that property and is in addition to the power of the court to appoint a receiver in proceedings for enforcing such a charge.
The court’s power to appoint a receiver applies “before proceedings have started, in existing proceedings or on or after judgement” and the appointment may be made without notice to the other side.
As a condition of the appointment the court may direct that the Receiver gives security to cover the Receiver’s liability for his/her acts and omissions as a Receiver.
Moreover, a receiver may only charge for his services if the court so directs and the court shall specify the basis of the Receiver’s remuneration and who is to be responsible for the Receiver’s fees or the fund from which (including income from property) the Receiver is to recover his/her remuneration.
Pursuant to Part 9 of the Insolvency Regulations 2022, no person may be appointed as receiver in accordance with the Insolvency Regulations “or any other ADGM legislation” unless they are registered as an Insolvency Practitioner with the ADGM, thus the person to be selected to act as Receiver must be on the register of the ADGM’s approved list of insolvency practitioners.
Powers and functions of the Receiver
A court-appointed receiver is an independent professional designated by the court to take possession of, manage, or preserve specific assets, or in some cases, an entire business, pending the outcome of a dispute or enforcement process. Unlike an administrative receiver who is an agent of the company over which one is appointed, the court-appointed receiver is an officer of the court who must act impartially and whose primary duty is to act in the best interests of the entity over which the receiver is appointed.
The powers granted to a court-appointed receiver are defined in the order of appointment and may include:
- Taking possession and control of specific property or assets;
- Collecting rents, profits or other receivables;
- Managing the day-to-day affairs of a business;
- Investigating transactions or ownership structures;
- Commencing or defending legal proceedings (with court approval); and
- Disposing of assets (often subject to further directions or approval).
Receivers must exercise their powers within the scope of the court order appointing them and if a receiver fails to comply with any rule or direction of the court, the court may order the receiver to attend a hearing to explain his/her noncompliance and the court, at that hearing, may make any order it considers appropriate.
Unlike a receiver appointed pursuant to a fixed and floating or just fixed charge security, a receiver appointed by the ADGM Court must act with:
- Impartiality: Not favouring any one party or interest;
- Good faith, diligence and integrity: Managing assets responsibly and competently;
- Transparency: Maintaining accurate records and reporting to the court as required;
- Fiduciary care: Avoiding conflicts of interest and ensuring no self-dealing.
Receivers have the power to apply to court for directions to assist them in carrying out their functions as a receiver.
Termination or Discharge of Receiver
A receiver (or any party) may apply for the receiver to be discharged on completion of the receiver’s duties and the court may terminate the appointment of a receiver at any time and appoint another in his/her place.
Upon discharge, the receiver may be ordered to:
- Submit final accounts and reports before being formally discharged;
- Require the receiver to pay into court any money held by him/her or specify to whom he/she must pay any money or transfer any assets still in his/her possession:
- Make provision for discharge or cancellation of any guarantee given by the receiver as security.
Conclusion
With the right legal and strategic approach, court-appointed receivership can offer a route to stability, transparency and asset protection in otherwise volatile or contested situations.
It combines the rigour of judicial supervision with the adaptability of equitable principles, making it particularly well-suited to the complex realities of cross-border commercial litigation and the direct applicability of English common law provides certainty, familiarity and trust for international investors and other stakeholders.
Chris is a Chartered Accountant, member of the ICAEW and on the list of approved Insolvency Practitioners of the DIFC and ADGM. He is also a UK, Cyprus and Romania licensed Insolvency Practitioner.
