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What is a Receiver in Business?

In the business context, a receiver is a neutral person appointed by a court to manage and safeguard assets during litigation or bankruptcy proceedings. They control the company's assets, operate the business, and even liquidate assets, if needed, to repay creditors.

Role of a Receiver in Business

A receiver is a financial appointee appointed to collect and manage assets for a business during a period of financial hardship. Generally, this professional is appointed by a lending company, to make sure the assets owned by the business are maintained and/or sold in order to pay off any debts that may have accumulated.

Receivers come from a variety of backgrounds, including advisors, liquidators, or turnaround managers. They’re responsible for overseeing the winding up of a company’s affairs, assessing the company’s financial position, and actively dealing with secure and unsecured creditors. They can also be appointed to manage assets and resources while the business operates.

How is a Receiver Appointed?

Under financial duress, a business or individual can apply to a court for the appointment of a receiver. The court may then appoint a receiver at the request of a secured creditor or by other means. The court has the authority to appoint a receiver to protect the interests of creditors, shareholders, or other persons with a financial stake in the business, even if the business is not insolvent.

Generally, the creditor provides the receiver with specific instructions about their duties. Depending on the circumstances, the receiver is responsible for completing and submitting all legal documents involved in the appointment.

Implications of Having a Receiver

When a receiver is appointed, they take over the day-to-day management of the business. This may involve collecting debts, recovering assets and disposing of assets. Also, a receiver may need to approve contracts, negotiate deals, and make long-term financial decisions that will affect the company’s future.

Having a receiver appointed can be a financially and legally burdensome process. It will require the business to forego all decision-making authority and allow the receiver to take over the management of the business. As a result, it may lead to significant losses in profits and possible liquidation due to the receiver’s decision-making.

Frequently Asked Questions

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