Who Can Be Appointed as a Receiver?
In a business litigation process involving a company’s dissolution, the parties might end up fighting due to fraud or mismanagement allegations. At this point, the courts often decide to appoint a receiver. Find out more about this person’s role and who can be appointed as a receiver.
What Is the Receiver's Role?A receiver is a neutral third party taking possession of a company's property following a formal appointment. The receiver may take up different roles depending on the type of receivership the company requires. The receiver's capacities stem from the document that governs his or her appointment - an agreement, statute, or bank order.
After the appointment, the receiver becomes responsible for managing and controlling the company's assets. Therefore, he or she basically starts running the business by virtually replacing the owner.
Receivers typically sell the assets in order to pay off a company's debts according to a priority order.
The secured creditors will be the first to recover their money, followed by unsecured creditors. A receiver`s aim is to maximize the assets' return. Sometimes, the court can decide to amplify the receiver's role and ask them to protect the asses, not only to dispose of them.
The receiver's role supersedes the role of the company's director. During receivership, the former manager will maintain his or her reporting authority and work closely with the receiver in fulfilling this duty.
After the receivership process is completed, the receiver is discharged from duty.
How Is a Receiver Appointed?There are three different types of receivers based on who has the authority to appoint them:
-Receivers appointed by a government regulator
Who Can Be Appointed as a Receiver?Practically, there are not many obstacles to becoming a receiver. There aren't any statutory requirements that can prevent someone from becoming a receiver. However, there are some exceptions when a person can't be appointed; a party's attorneys, one of the parties involved in the litigation, or a relative of the judge don't qualify for the receiver role.
Eventually, a more appropriate question, in this case, is who should become a receiver? To narrow down the search, we should consider the qualities that qualify a good receiver:
- First, a receiver should have a good understanding of the laws governing commercial disputes
- Secondly, a receiver should have good management skills because they will basically take charge of the company after their appointment
- Ideally, the receiver also has some knowledge about the company's field of activity in order to be able to manage the business
- Finally, receivers should be reliable, resourceful and last, but not the least, really available for this job
The receiver role is usually granted to:
- A court agent
- A fiduciary
- Individuals and not companies
A Receivership Entails Several Advantages for Which It Is Usually Preferred over Bankruptcy- The company's assets are protected and correctly distributed
- Receivership grants more flexibility
- The receiver's decisions are commercially-oriented
- It is less formal and faster
- It is less expensive
If you are wondering how to begin looking for a receiver, you could start by consulting a commercial lawyer. Someone who has experience in this area can tell you more about the receiver's role and point you in the right direction.