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90 Second Lesson: What is a state law receivership?

State Law Receiverships: An Overview

A receiver is a non-party neutral person or entity that is appointed and empowered by a court to receive, preserve, manage, and/or liquidate property interests that are at-issue in a lawsuit.

Receivership law in most states is not as clearly defined as federal bankruptcy law. Receiverships, therefore, often offer a party more flexibility to seek relief that is tailored to the particular circumstance.

The power to appoint a receiver historically arose from a state court’s equitable power to manage the property interests at-issue in a lawsuit and within the court’s jurisdiction during the administration of a lawsuit. Most states have also enacted statutes providing courts the discretion to appoint a receiver if certain, often loosely defined, requirements are met.

Some states have enacted comprehensive receivership statutes, including the enactment of the Uniform Commercial Real Estate Receivership Act. In addition, many states have enacted the Model Business Corporation Act or similar provisions that allow for the judicial dissolution of corporations and, ancillary thereto, the appointment of a receiver. Pursuant to most states’ statutes, the state or a creditor or shareholder of a corporation can, in specifically identified instances, seek judicial dissolution of a corporation and, ancillary thereto, seek the appointment of a receiver. These statutes provide the grounds, procedure, and rights relating to judicial corporate dissolution.

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[Editors’ Note: This is part of our irregular series in which we answer readers’ questions. If you have a question, submit it to [email protected], and we will try to answer it.

This 90 Second Lesson is based, in substantial part, on material reprinted from “Commercial Bankruptcy Litigation 2d” and “Strategic Alternatives For and Against Distressed Businesses,” with permission of Thomson Reuters. If you are a Westlaw subscriber, you can read more about this particular subject here.

To learn more about this and related topics, you may want to attend the following on-demand webinars (which you can watch at your leisure, and each includes a comprehensive customer PowerPoint about the topic):

  1. Bad Debtor Owes Me Money!
  2. Federal Equity Receiverships 101]

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About The DailyDAC Editors

The editors and editorial board of DailyDAC include preeminent restructuring and insolvency professionals, journalists, and editors. They are devoted to providing reliable and plain English education and deal intelligence about assignments, corporate bankruptcy, receiverships, out-of-court workouts and similar topics.

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