By:
Jack Hood | Content Manager | NMBL Strategies
and
Eric Peterson | Attorney | Spencer Fane
Understanding the Powers Granted to a Receiver
Receiverships are effective business solutions to many problems faced by courts, lenders, and investors engaged in attempting to maintain a distressed asset. Generally speaking, receivers have the power to take control of and protect assets, provide visibility on the financial affairs of a business, and stabilize operations. But what specific powers do receivers have to accomplish these ends?
States vary in their approaches. For instance, some states make a distinction between limited and general receivers. A limited receiver is a receiver that takes control over a discrete asset or assets. Typically, they are subject to restrictions in scope and authority. General receivers on the other hand control substantially all of the property of the receivership entity, including the management rights of the company at large. Some states provide default powers available to receivers upon appointment. Other states require courts to detail the specific powers assigned to the receiver being appointed. The appointment of a receiver could provide the receiver with all statutorily available powers, and all statutory duties and responsibilities. Because of the breadth of such an appointment, it is important to have a firm understanding of how the appointment order and the type of receivership being initiated affects how a receivership estate will be administered under court supervision. This article will examine the different processes states use for defining the scope of receiverships.