Asset Sales in Receivership: A Practical Guide for Professionals

Receivership is a court process in which a judge appoints a neutral third party to take control of property or an operating business. It is one of the most versatile tools in a creditor’s or court’s toolbox.

Once the receiver is in place, selling assets often becomes one of the key ways to maximize value and protect creditor interests. The receiver must balance selling quickly enough to avoid value erosion while ensuring the sale process is competitive and credible. Matthew Brash of Newpoint Advisors Corporation emphasizes the importance of transparency, impartiality, and constant communication with the court and stakeholders throughout the process.

Receivers often engage appraisers, brokers, auctioneers, and legal counsel who understand both the asset type and the receivership context.

While receiverships are available at both the state and federal levels, this article will review the intricacies of initiating a state court commercial receivership.

Why Asset Sales Matter in Receivership

For distressed businesses, selling assets generates cash and maximizes returns to creditors. It can also prevent deterioration when operations are no longer sustainable.

Eric Moraczewski of NMBL Strategies explains that once a receiver is appointed, their intervention often leads to one of three outcomes:

1. Liquidating all or part of the entity’s assets,
2. Selling the business as a going concern, or
3. Overseeing a settlement that resolves the dispute.

Understanding the Assets

Frank Simon of Simon PLC notes that sometimes, there’s nothing to sell, particularly in cases involving service businesses or entities tied up in litigation. In those cases, the receiver’s role can be investigative or administrative rather than transactional.

However, in cases where assets do exist, it is important to understand the various categories in which they can fall. After all, not all assets are alike.

• Real property sales require due diligence on title, liens, and local market conditions.
• Personal property ranges from specialized equipment to inventory, each with unique valuation and liquidation challenges.
• Distressed asset valuation typically yields lower prices than healthy market conditions, so realistic expectations are crucial.

Securing the Assets

Day one in a receivership is all about control. Allen Guon of Cozen O’Connor warns that receivers are personally responsible for safeguarding assets once appointed. Practical steps to doing so include:

• Changing locks and securing premises,
• Capturing and backing up electronic data,
• Taking physical inventory,
• Changing passwords and redirecting mail, and
• Confirming insurance coverage.

In contested cases, these steps must be immediate to prevent insiders from removing or hiding assets.

Insurance Considerations

Insurance is essential. Moraczewski advises confirming whether existing coverage is adequate, whether directors-and-officers (D&O) protection applies to the receiver, and whether additional property or liability policies are necessary. For specialized or high-risk assets, like manufacturing equipment, hotels, or title companies, coverage should align with operational risks and hazards.

Choosing a Sales Method

The right sales process depends on the nature and value of the assets. Common approaches include:

• Private sales for unique or niche assets.
• Public auctions to maximize bidder exposure.
• Stalking horse bids to set a minimum price.
• Brokered listings for real estate or ongoing businesses.

Guon points out that in some cases, it makes sense to solicit offers for both the entire business and individual assets, then select the option that delivers the highest overall return.

Transparency and Noticing

Transparency is both a legal requirement and a trust-builder. Bidding rules should be set in advance. Communication around timelines, procedures, and bidder eligibility should be clear. This will help prevent challenges and secure court approval.

Selling ‘Free and Clear’ of Liens

A free and clear sale ensures the buyer receives the asset without liens, claims, or encumbrances, which is critical for attracting buyers and obtaining title insurance in real estate deals. Be careful as state laws differ around such sales. For example, Illinois relies heavily on common law, with reform legislation underway to standardize free and clear sales. Missouri codified its receivership statutes in 2016, which include free and clear provisions.

Key Takeaways

Every receivership is different, but if you secure the assets, pick the right sales process, and stay transparent, you set yourself up for the best possible outcome for creditors.

Remember to:

• Plan the exit early: Know from the start whether liquidation, going concern sale, or settlement is the likely outcome.
• Secure assets immediately to prevent loss or deterioration.
• Match the sales method to the asset for the best return.
• Communicate clearly with the court, creditors, and bidders.
• Use free and clear authority to remove buyer uncertainty.

To learn more about this topic, view Asset Sales in Receivership. The quoted remarks referenced in this article were made either during this webinar or shortly thereafter during post-webinar interviews with the panelists. Readers may also be interested to read other articles about state court receiverships.

This article was originally published on August 25, 2025.

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