| Receivers may be appointed where a company is | | | | orders places the business at greater risk for |
| insolvent, in danger of becoming insolvent, winding up its | | | | appointment of a receiver. |
| affairs or a judgment debtor. However, did you know | | | | Such pre-trial appointments can be a powerful tool to |
| that prior to trial a plaintiff may seek a court-appointed | | | | reign in renegade management, ensure the business is |
| receiver for a solvent, on-going business? | | | | not run into the ground pending trial and preserve |
| Receivers are primarily a statutory creation. California | | | | assets for proper business advantage and/or post-trial |
| offers a broad "catch-all" provision permitting receivers | | | | collection. |
| when necessary to preserve the property or rights of | | | | However, a plaintiff who has an ownership interest in |
| any party. More specifically, receivers may be | | | | the on-going business should also consider the |
| appointed where property or funds are in danger of | | | | downside. News of the appointment might negatively |
| being lost, removed or materially injured. These | | | | impact customer interest and supplier alliances. A |
| statutes come to the aid of plaintiffs when a solvent, | | | | receiver unfamiliar with the business or industry could |
| on-going business is involved. | | | | even damage the company and impair its day-to-day |
| For example, a court may appoint a pre-trial receiver | | | | operations. Moreover, the cost of a receiver can be |
| for a solvent, on-going concern when management | | | | significant, and may be borne by the business and/or |
| dominating the corporation is accused of | | | | the plaintiff. |
| misappropriation, fraud, mismanagement, self-dealing, | | | | Thus, when a receiver is sought for a solvent, on-going |
| failure to share profits or failure to account. In such | | | | concern, the idea that "less is more" may be a sage |
| cases, a court is justified in appointing a disinterested | | | | strategy, and a plaintiff may find it advantageous to |
| party as a receiver to control the business, preserve | | | | seek a receiver for limited purposes. For example, a |
| its assets and protect the rights of the complaining | | | | plaintiff might request that a receiver merely "oversee" |
| stockholders or other owners pending trial. | | | | existing management rather than "replace" existing |
| Courts are also willing to appoint a pre-trial receiver | | | | management, that a receiver merely take over limited |
| where some aspect of the business is being | | | | tasks (i.e., an accounting), or that a receiver merely |
| conducted illegally, particularly if the business could lose | | | | preserve particular assets pending trial. |
| its license to operate or is exposed to third-party | | | | Tailoring a receiver's involvement to a plaintiff's actual |
| litigation. | | | | needs may not only increase the likelihood a receiver |
| Receivers are particularly appropriate where | | | | will be appointed for a solvent, on-going concern, but |
| defendants are likely to refuse to follow court orders | | | | may also offer the best long term benefits for both |
| or injunctions. Thus, a track record of violating court | | | | the plaintiff and business entity. |