What Is a Receivership?

business receivership bankruptcy
Photo by: Photo by: Towfiqu Barbhuiya on Unsplash

Businesses face struggles regularly, no matter how profitable they may be. There are times when conflicts, lawsuits or financial issues require assistance, often through the use of a receivership. In such cases, neutral financial experts, acting in a fiduciary role,can help a business stay afloat to avoid bankruptcy and assist in resolving commercial disputes, insurance claims, litigation and more.

No matter the dispute, it is essential that businesses take swift action to solve the issue at hand. That is where receiverships come in. Read on to learn more about this process and how it may benefit your business.

Receivership Basics

Originated as a way to protect property and resolve unpaid debts, receiverships are still used today for expanded reasons. In general, a receivership is when a Court-appointed fiduciary, a receiver, is appointed to take over for a business, either to ensure that creditors are able to recover any funds that may be in default or to assist with complex dispute resolutions. Receiverships can also function as a way for a company to avoid bankruptcy, with financial experts serving as the receivers to improve profitability.

What Are a Receiver’s Responsibilities?

A receiver may be appointed by a court or appointed privately if agreed-upon by the parties, and the main role may be to asses a business’ financial viability, its existing debts and to rebut any claims made against the company, but the receiver’s charge is usually given by the Court. Typically, receivers are financial experts, such as accountants or turnaround professionals, though they may also be attorneys, since there are often legal factors that go into these cases.

The receiver may be given certain rights to do the following on behalf of a company:

  • Buy or sell property
  • Collect company income
  • Enter into leases, deeds or contracts
  • Maintain a bank account
  • Investigate issues or provide reporting to the Court as ordered

By performing these tasks and more, receivers can assist companies in stabilizing and managing debt, navigating dysfunctional relationships and speeding up the litigation process.

How Receiverships Are Used

Receiverships can be used as remedies for a range of issues, many of which involve disputes between creditors and lenders, partners, shareholders or even in cases of high-asset divorce. Some of the most common uses include the following.

Business Insolvency

In such cases, a receivership is used to help a company avoid filing for bankruptcy. The receiver can sell assets and settle liabilities with creditors and liens to maintain solvency on behalf of the business.

Shareholder Disputes

Working as a neutral third party to settle shareholder disputes, receivers are appointed to make corporate decisions to ensure the company’s value is preserved. Doing so can prevent the loss of that value due to litigation between shareholders.


In cases of fraud, a court-appointed receiver can be used to issue subpoenas and assess a company’s finances. That receiver may also receive the right to assume possession of an organization’s assets that were purchased using the proceeds of fraudulent behavior.

Need Advice Regarding Receiverships?

Rocky Mountain Advisory can help businesses through the receivership process and we can serve as independent, third-party trustees. If you need advice on navigating a receivership case, contact a member of our team.

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