• What is Receivership?
• Who is a receiver?
• What does a receiver do?
• When is a Receivership Authorized?
• Prerequisites to a Receivership
• Receiverships are Used to Protect the Interests of Many Parties
• Notice Requirements
• Operation of the Business
• Methods of Liquidation
• Employment of Professionals
• Compensation of Professionals
• Stay and Restraint of Creditor Actions
• Disadvantages of Receivership
• Advantages of Receivership

What is Receivership? 
A receivership involves taking possession of a person’s property to preserve it during the pendency of litigation or to carry a judgment into effect.

Who is a receiver?
The person appointed by the court to take possession of the property is a receiver.

What does a receiver do? 
A receiver is merely the “hand of the court,” to aid it in the preservation and management of property for the benefit of those to whom it may ultimately be adjudged to belong.

When is a Receivership Authorized ?

• Corporate dissolution
• Partner dissolution and accounting
• Insolvency
• Fraud
• Gross mismanagement
• Dissension among stockholders or partners
• Dissolution of marriage
• Enforcement of securities law
• Disputes involving title to property
• Enforcement of a judgment
• Carry a judgment into effect
• Dispose of a property according to a judgment

Prerequisites to a Receivership

• To prevent loss of property
• To prevent material injury to property
• To prevent removal of property beyond the court’s jurisdiction
• A receiver will be appointed where the parties will be served to have a third party take charge of, cultivate care for, preserve, collect, harvest, pack or sell property

Receiverships are Used to Protect the Interests of Many Parties

• Creditors
• Stockholders
• Partners
• Spouses
• Trust deeds/mortgage holders
• The public through the Attorney General
• Secured creditors
• (Joint) owners of property
• Judgment creditors

Notice Requirements: A notice is not required unless deadline to file claims is set by court order. There is no meeting of creditors and no examination of Debtor, except noticed depositions.

Operation of the Business
Court order permitting continuation of business activity

Methods of Liquidation

• Bulk Sale
• Turnkey Sale
• Sale to an Entity With Which a Principal of the Debtor Is Affiliated
• Other Assets
• Piece-Meal Sale
• Going-Concern Sale
• Accounts Receivable

Employment of Professionals

Court Order to Retain Persons Who Will Render Professional Services

Compensation of Professionals

Court Order to Compensate or Reimburse Professionals Professional

Stay and Restraint of Creditor Actions

Automatic Stay of all Creditor Actions Including Foreclosure and Repossession

Disadvantages of Receivership

• Federal Taxes have Priority
• Wage Priority Claim is $650 Less than Bankruptcy
• Susceptible to Creditor Attack
• Receiver Lacks the Status of a Bona Fide Purchaser For Value
• Receiver Lacks the Status of a Judgment ,  Creditor
• Receiver Lacks Any General Avoidance Powers

Advantages of Receivership

• The Business Can be Operated
• Expediency of the Liquidation: The Court Will Not Continue the Receivership Beyond What is Necessary for the Welfare of the Estate and the Parties to the Case (Including Creditors)
• Ability of the Principals to Participate
• Costs of Liquidation are Reduced
• Court Supervision Mandates Duty to Account
• Determine the Outcome in Advance
• Federal Taxes have Priority
• Simplification of the Liquidation Process
• Employment and Payment of Professionals
• Avoiding the Proclivities of Liquidation Agent (Trustee)