Obtaining and enforcing a judgment can take months or years, and in the meantime the debtor pay be dissipating or hiding assets. However, creditors have a range of prejudgment remedies available, including a receivership. In a receivership, a third party (often nominated by the creditor) is appointed to take control of the debtor’s business or assets. We assist creditors in imposing and managing receiverships, and we also assist debtors in opposing, limiting or operating under receiverships as well as removing receivers.
In one example, on behalf of our bank client, we imposed a receivership over an operating almond reprocessing facility – one of only a handful in the world. The business of the facility was to take the byproduct of other almond processing facilities and turn it into almond baking powder and other saleable goods. Rather than shut down the business, a carefully tailored receivership was crucial to turning the facility’s valueless supplies into valuable inventory, resulting in a recovery for creditors.
In another example, we assisted a large wine distributor in successfully opposing a bank’s ex parte motion to impose a receiver. Thereafter, we worked to limit the scope of the receivership and maximize the distributor’s ability to continue to operate under the receivership, sell inventory, restructure distribution channels and explore sale options.
In evaluating options for a business reorganization in receivership, the objective is to preserve the asset value to pay creditors. Businesses and their lawyers must consider the cost, timeliness and ability to transfer clear title. The best way to do this is through a confidential consultation with an experienced attorney.