In law, a receivership is a situation in which an institution or enterprise is held by a receiver—a person “placed in the custodial responsibility for the property of others, including tangible and intangible assets and rights”—especially in cases where a company cannot meet its financial obligations and is said to be insolvent. The receivership remedy is an equitable remedy that emerged in the English chancery courts, where receivers were appointed to protect real property. Receiverships are also a remedy of last resort in litigation involving the conduct of executive agencies that fail to comply with constitutional or statutory obligations to populations that rely on those agencies for their basic human rights.
Receiverships can be broadly divided into two types:
- Those related to insolvency or enforcement of a security interest.
- Those where either
- One is Incapable of managing one’s affairs and so the court appoints a receiver to manage the property on one’s behalf—for example a receiver appointed by a Court of Protection under mental health legislation (in some jurisdictions, called conservatorship).
- The court seizes control of property due to breaches of law or regulation.
Receiverships relating to insolvency are subdivided into two further categories: administrative/equity receivership, where the receiver is appointed wide management powers over all or most of the property of a business, and other receiverships (sometimes misleadingly called fixed charge receiverships) where the receiver has limited control over specific property, with no broader powers beyond managing or selling the individual asset.
Receivers are appointed in different ways:
- Government regulator appointed
- Privately appointed
The receiver’s powers “flow from the document(s) underlying his appointment”—i.e., a statute, financing agreement, or court order.
The duties of a receiver:
- Run the company to maximize the value of the company’s assets, sell the company as a whole, or sell part of the company and close unprofitable divisions
- Secure the assets of the company or entity
- Realize the assets of the company or entity
- Manage company affairs to pay debts
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