receivers can be appointed where a company is insolvent, in danger of becoming insolvent, winding up its affairs or a judgment debtor. Nevertheless, did you know that prior to trial a plaintiff can seek a court-appointed receiver for a solvent, on-going business?

receivers are mainly a statutory creation. California offers a broad “catch-all” provision allowing receivers when necessary to preserve the property or rights of any party. More distinctively, receivers can be appointed where property or funds are in danger of being lost, removed or materially injured. These statutes come to the aid of plaintiffs when a solvent, on-going business is involved.

for example, a court can appoint a pre-trial receiver for a solvent, on-going concern when management dominating the corporation is accused of misappropriation, fraud, mismanagement, self-dealing, failure to percentage profits or failure to account. In such cases, a court is justified in appointing a disinterested party as a receiver to control the business, preserve its assets and protect the rights of the complaining stockholders or other owners pending trial.

courts are similarly willing to appoint a pre-trial receiver where some appearance of the business is being conducted illegally, especially whether or not the business could lose its license to operate or is exposed to third-party litigation.

receivers are especially appropriate where defendants are probable to refuse to follow court orders or injunctions. Therefore, a track record of violating court orders places the business at dandier danger for appointment of a receiver.

such pre-trial appointments can be a mighty tool to sovereignty in renegade management, make sure the business is not run into the reason pending trial and preserve assets for proper business vantage and/or post-trial collection.

however, a plaintiff who has an ownership interest in the on-going business ought to similarly look at the downside. News of the appointment might negatively impact client interest and provider confederacies. A receiver unfamiliar with the business or industry could even harm the organization and impair its day-to-day operations. Furthermore, the pricing of a receiver can be significant, and can be borne by the business and/or the plaintiff.

thus, when a receiver is sought for a solvent, on-going concern, the idea that “less is more” can be a sage strategy, and a plaintiff can find it advantageous to seek a receiver for limited intentions. For example, a plaintiff might request that a receiver plainly “oversee” existing management instead of “replace” existing management, that a receiver plainly take over limited tasks (i. E. , an accounting), or that a receiver plainly preserve queer assets pending trial.

tailoring a receiver’s involvement to a plaintiff’s actual needs can not only increase the likelihood a receiver are going to be appointed for a solvent, on-going concern, but can similarly offer the best long-run benefits for both the plaintiff and business entity.