Receivership

A receiver is appointed by a court to take custody of property or a business, preserve it, and act under court supervision. It is an extraordinary remedy, ancillary to some other claim.

Grounds. Risk of dissipation or waste of the property; deadlock or misconduct making the business unmanageable; a contractual right to appointment in a loan agreement; statutory grounds in receivership and dissolution statutes; and enforcement of judgments.

Scope. The order defines everything — which assets, what powers to operate, borrow, sell or settle, what reporting, and what compensation. A poorly drafted appointment order is the source of most receivership disputes.

Effect. Appointment typically displaces management, imposes a stay on actions against the receivership property in some systems, and vests the receiver with authority to pursue and defend claims.

Cost. Receivers and their counsel are paid from the estate, usually with priority. That expense is the strongest argument against appointment where the asset is modest.

In lending. Appointment under a mortgage or security agreement is often faster and cheaper than foreclosure and preserves going-concern value, which is why commercial loan documents routinely provide for consent to appointment.

In owner disputes, a receiver is the middle path between doing nothing and dissolving, and the threat of one frequently produces a negotiated resolution.