Receiverships: An Overview

A receivership is a process in which a Receiver is appointed by a Creditor to receive a company’s assets in order to liquidate them so that the Creditor can recoup the value of those assets. If a company has utilized an asset as collateral for a loan, that asset is eligible to be liquidated as part of the receivership.

What Are the Responsibilities of a Receiver?

The Receiver is tasked with making decisions that will be in the best interest of the Creditor or Creditors that are owed. They may determine that continuing to operate the company will provide the most value for the creditor, or they may decide that shutting down operations and liquidating the company’s assets is the best course of action. The Receiver may also investigate company practices and executives to determine whether or not they’ve violated any laws, governance guidelines, or agreement terms.

What qualifications does a Receiver need?

One of the most basic qualifications for a Receiver is that they are an impartial third party between the Debtor and Creditor. They should also have expertise in company wind downs and liquidations.

What are the benefits of a Receivership?

The primary benefit of a receivership lies in the ability to preserve value. In cases where underlying assets are diminishing in value, a receivership transfers control of the asset so that its value is preserved until it can be liquidated. Receiverships also allow for an impartial third-party to evaluate a business’s current state and determine which course of action results in the most value preservation for stakeholders.