Anonymised, illustrative composite. A secured lender petitioned for a court-appointed receiver over a mid-market machine shop. A buying group acquired the operating assets from the receiver — and found a customer’s IP licence does not disappear just because the asset does.
At a glance
A secured lender to a mid-market machine shop applied to court for the appointment of a receiver after covenant defaults went uncured. Under BIA section 243(1), a court may appoint a receiver on a secured creditor’s application “if it considers it to be just or convenient to do so,” and section 243(4), marginal note Trustee to be appointed, provides that “only a trustee may be appointed” — the receiver who took possession of the shop’s premises, equipment and inventory was, by statute, a licensed insolvency professional, not anyone chosen by the lender or by any prospective buyer. (Section 243(6) is a different rule entirely: it lets the court charge the receiver’s fees and disbursements ahead of the secured creditors.)
A strategic operator working alongside a private-equity co-investor wanted the shop’s equipment, order book and customer contracts, but structured as a straight asset purchase from the receiver rather than a share deal with the distressed entity’s liabilities attached. That meant working through a court-supervised sale process rather than a negotiated deal with a motivated but unconstrained seller, and diligence had to be compressed to the receiver’s timeline rather than the buyer’s own.
The receiver commissioned an appraisal that put the shop’s asset fair market value at $2,400,000, down from a $3,100,000 book value carried before the default. The buying group’s winning bid, after a short marketing process, was $2,250,000 — 93.8% of appraised FMV. Against the lender’s $2,600,000 secured claim, the sale proceeds delivered an 86.5% recovery. BIA section 30(6)(d) lists “whether the consideration to be received for the property is reasonable and fair, taking into account the market value of the property” among the factors a court weighs. That provision did not itself apply here — section 30 governs a trustee in bankruptcy selling the property of a bankrupt, and 30(4) and 30(6) are triggered only by a sale to a person related to the bankrupt, which this buyer was not. It is quoted because the receiver’s own approval motion is tested on the same substance: process, consultation, market value, and whether a better offer was available.
A court-appointed receiver’s authority to sell does not come from BIA section 30. Section 30’s marginal note is Powers exercisable by trustee with permission of inspectors, and every power in it — including the power in 30(1)(a) to sell “all or any part of the property of the bankrupt, including the goodwill of the business” — belongs to a trustee administering a bankrupt estate. A section 243 receiver’s powers are whatever the appointment order confers under section 243(1)(a) to (c), and a sale is approved on motion to the supervising court, usually with a vesting order. That vesting order is real protection: it can clear named claims and encumbrances against the assets. What it cannot clear is the point the buying group nearly missed, because Parliament put it beyond the court’s reach. BIA section 246.1(1), marginal note Intellectual property — sale or disposition, provides that where the insolvent person is party to an agreement granting another party a right to use intellectual property “that is included in a sale or disposition by the receiver, that sale or disposition does not affect that other party’s right to use the intellectual property — including the other party’s right to enforce an exclusive use — during the term of the agreement…as long as the other party continues to perform its obligations under the agreement in relation to the use of the intellectual property.” A paid-up customer licence granted before the receivership is exactly that, and it survives the sale by statute, not by argument.
The buying group’s diligence counsel caught the licence during contract review, four days before the sale hearing, and priced the deal knowing section 246.1 would carry it through — the customer kept its right to use the fixture design at no additional charge, subject only to continuing to perform whatever obligations the licence still imposed on it, and the buyer adjusted its post-close pricing model accordingly rather than assuming it could re-license or retire the design. The $2,250,000 bid stood; nothing was renegotiated because the exposure was known before the bid was final. See what the ten-day pre-receivership window looks like from the other side, and how an asset purchase agreement allocates what does and does not transfer.
Had the licence surfaced after closing instead of before, the buying group would have been litigating a surviving third-party right against assets it believed it owned free and clear — a dispute the receivership process does nothing to prevent, because section 246.1(1) puts the licensee’s right outside what the sale, and outside what any vesting order granted on it, can touch. Diligence counsel’s contract review, budgeted as a routine line item, is what converted a post-closing dispute into a pre-bid pricing adjustment: the cost avoided is not a number this file states, because the dispute never happened, and that is the entire point of catching it early.
A receivership sale reads, on the surface, like the cleanest possible asset purchase — a court order, a competitive process, an appraisal setting the price floor. That cleanliness is about the process, not about every right a third party might hold against the assets themselves. Any buyer treating a court-approved receivership sale as equivalent to a clean-title guarantee is skipping a diligence step the court order cannot do for them — and in the case of an outbound IP licence, one the court has no power to do at all.
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