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Court-Appointed Receiverships: What Happens When a Receiver is Appointed?

court appointed receiverships

A receivership is the court-ordered management of business property, usually by someone outside the original management of that business or property.

Receiverships are traditionally used to stabilize failing companies, help creditors recover money owed under a secured loan, or maintain a company during an ownership or leadership dispute.

A receivership can take many forms. For instance, privately-appointed receivers act on behalf of the secured creditor that appointed them, while court-appointed receivers act on behalf of all creditors.

Let’s dive into what court-appointed receiverships should look like and how you can get help preserving your business assets.

What is a Court-Appointed Receivership?

The goal of receivership is to maintain the company, and ideally, return your company to profitability.

If you’re reading this, you probably have a general idea of what receivers do. But if not, let me explain—A receiver takes over the management of a property or business when there are problems, and its owners can no longer manage it effectively.

In other words, a receiver becomes the interim CEO of your business until the dispute is over and management can take the reins again.

Receivership is just one form of court-ordered intervention for companies in the dispute or financial distress to maintain, restructure, or dissolve.

Receivers are appointed by the court by agreement or at the request of an owner, creditor, or third parties to whom a company owes money.

What Are the Receiver’s Responsibilities?

A court-appointed receiver is tasked with:

  • Marshaling all the assets of the company
  • Making an inventory of the assets
  • Managing the company with good faith and prudent business judgment
  • Notifying creditors of the receivership
  • Negotiating terms with creditors, creating a repayment plan (if restructuring is possible)
  • Repaying debts to creditors
  • Maximizing profits
  • Hiring new management (if needed)
  • Monitoring administration and submitting monthly progress reports to the court, the company, and secured creditors
  • Reporting to the court findings of fact, after the investigation

How Do Court-Appointed Receivers Get Paid? 

To get paid, court-appointed receivers submit itemized reports to the court listing the fees and expenses associated with their work. Often these fees and costs are authorized by the agreement of interested parties, although interested parties are allowed to object.

Absent agreement, the court considers the Receiver’s request and authorizes payment to the receiver at intervals during the case for services and expenses. Payment of receivers’ fees comes from the assets of the receivership estate.

Ultimately, the court decides how much a receiver should be paid.

Hire a Pro — Contact J. Muir & Associates for Your Business Needs 

The most important thing to remember about receiverships is that they are not a one-size-fits-all solution. In fact, receiverships can be very complex and are a specialty of very few attorneys. Each case is unique and requires a thorough understanding of the facts before making any decision.

If you have questions about the appointment of a receiver for your business, speak to an experienced Miami business lawyer. We can help you understand what to do if a receiver is appointed and guide you through the process so that everything goes off without a hitch.

Author Bio

Jane Muir is a Shareholder and Managing Partner of J. Muir & Associates, a Miami business law firm she founded in 2018. With more than 13 years of experience in business, she is dedicated to representing clients in a wide range of legal areas, including business litigation, contracts, corporate formation, insolvency, nonprofits, partnership disputes, and other business law matters.

Jane received her Juris Doctor from the University of Miami School of Law and is a member of the Dade County Bar Association and Coral Gables Bar Association. She has received numerous accolades for her work, including being named among the “20 Under 40” in 2016 by Brickell Magazine. Super Lawyers named her a Rising Star from 2014–2019 and selected her for the Super Lawyers status.

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