Receivership services are a type of legal process in which an independent third party, known as a receiver, is appointed by a court or other authorized party to take control of and manage the assets of a company or individual that is in financial distress. The receiver’s primary responsibility is to preserve and protect the assets of the company or individual and to manage them in the best interests of the creditors and other stakeholders.

Receivership services can be utilized in various situations, including bankruptcy, foreclosure, or other forms of financial distress. They can also be used in situations where a company is being liquidated or restructured. In some cases, the receiver is appointed to manage the assets of a company or individual on an interim basis, while in other cases, the receiver is appointed to manage the assets permanently.

EDS Court-Appointed Receivers are officers/agents of the Court with a fiduciary duty to the Court and all parties involved in the litigation to preserve, protect, manage, and operate the business or property, real and movable, collect all receipts and pay all necessary bills associated with the business/property such as those related to insurance and utilities, rents, and provide monthly accounting’s to the court and all interested parties. The Court also allows the Receiver to make necessary improvements to the property as well as market it for sale and/or lease.

Our award-winning receivership services have earned us the distinction of being the only Court-Appointed Receiver in the country that the United States Environmental Protection Agency (USEPA) allows to conduct such services on active Superfund Sites.

We are pleased to serve as Court-Appointed Keepers for the U.S. Marshals Service for federal court seizures of assets under aviation and admiralty jurisdiction.

The receiver’s responsibilities may include:

• Taking possession and control of the assets
• Identifying, valuing, and preserving the assets
• Managing and operating the assets to generate revenue
• Selling or disposing of the assets
• Paying the company’s or an individual’s debts and obligations
• Preparing and submitting reports to the court or other authorized party

Receivership services can be an effective way to manage and preserve the assets of a company or individual that is in financial distress. The court or other authorized party appoints the receiver and acts as an independent third party, which can provide a measure of objectivity and impartiality to the process.

It’s important to note that the receivership process is typically court-supervised, and the receiver’s actions and decisions are subject to court approval. In some jurisdictions, the receivership process may be subject to different laws and regulations.

Our Court-Appointed Receivership Services — State and Federal

State Court Receiverships

A state court receiver is appointed by the court to take possession of specific assets, including property or businesses, and to administer them for the benefit of all parties. State court receiverships are typically used as an alternative to bankruptcy, in business disputes, to enforce a judgment, or as part of state regulatory action.

Corporate Monitorships

Regulators frequently require the appointment of a corporate monitor to ensure compliance with the terms of a settlement between a company and a regulator. The appointment of a monitor allows a company time to take corrective actions pursuant to a settlement with the regulator, rather than facing more severe punishment or fines. EDS has extensive experience serving as an independent monitor while also minimizing the impact on the operating business.

Trustee in Bankruptcy

A trustee is an independent, third-party neutral assigned to administer a bankrupt estate for the benefit of the estate’s creditors. As trustee, EDS has decades of experience in marshaling, protecting, preserving, and administering assets for the benefit of creditors.

And as a trusted Court-Appointed Custodian/Special Master/Liquidator.

Federal Receiverships

A federal receiver is an independent third-party neutral appointed by a federal district court at the request of a regulatory agency to prevent irreparable harm. Once appointed, the receiver is usually charged by the court to protect and preserve assets, locate additional assets, claw-back ill-gotten gains, file third-party litigation, liquidate estate assets, establish a claims procedure, and develop a distribution plan to provide restitution to victims in the case.

UNDERSTANDING THE STRATEGIC BENEFITS OF FEDERAL RECEIVERSHIPS

Often overlooked, receiverships can be an extremely valuable and potent tool that litigants can use to change the dynamics in a case, protect potential litigation recoveries, and prevent further fraud, waste, and dissipation of assets.

While most practitioners consider receiverships a creature of state law, receiverships are also available under federal law in certain circumstances—and not just in connection with bank failures or securities enforcement actions.

What is a federal receivership?

When disputes arise regarding a company’s operations or property, the parties involved may initiate and engage in litigation, where litigants argue about their rights, courts rule, and make decisions. Alternatively, they may seek bankruptcy to gain leverage or maximize value. While such processes can produce equitable outcomes, they are often expensive and time-consuming.

A federal receivership, however, is an alternative that offers more cost-effective and time-efficient options for the parties involved. When a court appoints a receiver, the court empowers an individual to act as an officer of the court. That officer is neither an agent nor an employee of the parties, but rather is appointed to serve as an independent neutral who reports to the court. A receiver is empowered to safeguard disputed assets, administer the property, and assist the court in achieving a final, equitable distribution of the assets if necessary. In essence, the court appoints someone to ensure disputed assets do not disappear and are not mismanaged or dissipated.

How is a federal receivership created?

Every federal receivership starts with the filing of a verified complaint. Once a complaint is filed, any party may request the appointment of a neutral receiver, either on an emergency basis – akin to a temporary restraining order in which the court appoints the receiver ex parte – or on notice to the other party.

While receivers come in various forms and derive their authority from multiple sources, federal receiverships are generally governed by Rule 66 of the US Federal Rules of Civil Procedure. Under that rule, the Federal Rules apply to receivership actions; however, the establishment and administration of the receivership must conform to historical practice in federal courts or local rules. Therefore, when administering receiverships, courts are guided by precedent from other federal courts.

Although courts consider the appointment of a receiver an ‘extraordinary remedy’, they recognize that it is appropriate to do so when clearly necessary to protect the plaintiff’s interests in property. When a contract contemplates explicitly the appointment of a receiver, as is often the case in loan agreements and mortgages, courts generally will honor the parties’ agreement.

Without clear contractual language, courts consider several other factors, including fraudulent conduct on the defendant’s part, the imminent danger of the property being lost, concealed, injured, diminished in value, or squandered, and the inadequacy of available legal remedies. After analyzing these factors, the allegations, and possibly some evidence, a court will decide whether a receivership is an adequate remedy.

What powers does a federal receiver have?

The powers of a federal receiver are outlined in the court’s order of appointment. The appointing court may authorize a receiver to take possession of real and personal property and sue for, collect, and sell obligations based on the conditions and purposes the court directs. Additionally, the property could also be administered, collected, improved, leased, repaired, or sold based on possessing demonstrable expertise in such areas. Significantly, the authority of a receiver is limited to that of the entity or entities in the receivership. The receiver’s power to sue, for example, would only be provided insofar as the entity already possessed that right in the first instance.

When is a federal receivership a good option?

Receiverships may be appropriate in numerous situations. A few common scenarios are outlined below.

Real estate projects with diverse jurisdictions. Disputes over real estate projects are particularly suitable candidates for receiverships, as ensuring the continued maintenance of the property is a paramount concern. More specifically, federal receiverships are available where there is diversity of citizenship among the parties (that is, the plaintiff and the defendant are citizens of different states). In the most common situations, lenders and borrowers may be residents of different states.

And when real estate projects involve properties located in multiple states or districts, the use of the federal process is especially beneficial. First, even in diversity cases, uniform federal law governs the appointment of the receiver. Second, a federal statute provides that a receiver appointed in any federal court is vested with complete jurisdiction and control of all property, wherever located, with the right to take possession. Parties to a dispute over property (e.g., land, equipment, and product) in multiple states can thus benefit from the relative simplicity of a uniform receivership process governed by a single court.

Insolvent operating businesses where fraud may exist. Disputes arising from fraudulent activities in operating businesses are good candidates for receivership because they involve the possible concealment or dissipation of assets. Primary considerations on appointing a receiver include a focus on the necessity to protect, conserve, and administer property pending final disposition of a suit. Fraudulent activities are concealed from creditors, making it difficult to uncover evidence necessary to reveal such behavior. Thus, while there may be an urgent need to prevent the dissipation of assets from fraudulent activity, the nature of fraud makes it more challenging to uncover the deception and prove the need for court intervention.

While there are more well-known and established methods of securing assets, federal receiverships are relatively straightforward.

A federal receivership provides unique value in these instances because parties are capable of appointing receivers on an ex parte basis. While the appointment of a receiver on an ex parte basis requires exceptional circumstances, receiverships are an option to prevent irreparable damage or potential abscondment of assets without alerting the opposing party.

Business divorce cases. Business divorce cases are also often ideal candidates for federal receiverships. When business owners have an unfortunate falling out, there is a risk that assets of the business could be dissipated by one co-owner to the detriment of the other owners. The concerned counterparty may want to ensure that partnership assets are not disposed of by the whim of angry parties. A receiver would safeguard the assets and protect them for the mutual benefit of both parties, resulting in a more equitable outcome compared to leaving the parties to decide among themselves.

When bankruptcy is too expensive. Federal receiverships should also be considered as an alternative to bankruptcy proceedings when the latter proves to be too costly. On a fundamental level, one of the key differences between bankruptcy and receivership is that bankruptcy requires the debtor or lender to engage in significant motion practice and a greater number of court actions. Despite the existence of fees and reporting requirements in a receivership, they are generally significantly less than those in a bankruptcy proceeding. Thus, the time saved and the reduced expenses in a receivership case often make receiverships a more attractive alternative to bankruptcy.

In each of the situations outlined above, a federal receivership may be strategically advantageous. While there are more well-known and established methods of securing assets, federal receiverships are relatively straightforward. And most importantly, they provide an attractive option for parties who need an independent party to ensure assets do not disappear, are not concealed, and are protected from degradation in value.

EDS provides a comprehensive range of Distressed Asset Management, Turnaround Management, Collateral Management, and Risk Mitigation services across various industries and asset classes, including real and movable, tangible and intangible assets, to financial institutions, creditors, attorneys, law firms, and numerous other stakeholders worldwide.

We provide a broad range of customized distressed asset and loan portfolio special servicing management, from single assets to loan and collateral asset portfolios of all sizes. This includes 24/7/365 Interim/Crisis Management, Replevin/Asset Recovery and Disposition, ASA/MAI/RICS appraisals, customer service, sending monthly payment statements, collecting monthly payments, maintaining records of payments and balances, collecting and paying property taxes and insurance, managing escrowed funds, administering operating expense accounts, remitting funds to investors, client/investor reporting, IRS reporting, and file and records management.

Turnaround Management and Restructuring Services:

Our Turnaround Management Systems^® and Restructuring teams marshal onsite 24/7/365 throughout the Americas to provide the complete spectrum of interim management and turnaround services. Our teams work closely with creditors and their legal representatives to enhance the going-concern value of troubled businesses and business assets that might otherwise be lost during bankruptcies, foreclosures, and related actions, while actively pursuing permanent solutions.

A Turnaround Management Scenario… A borrower in financial distress raises numerous commercial loss concerns for its creditors, including an increased risk of partial or non-payment of its loan, additional liabilities, increased legal costs and expenses, and a greater utilization of creditor resources. When a borrower shows signs of distress, it is critical for the creditor to promptly and proactively develop a thoughtful turnaround management strategic plan to mitigate issues and identify options available to strengthen the creditor’s position in the credit facility. Taking this step is an essential first step for a creditor interested in maximizing its recovery and minimizing its exposure.

Collateral Management Services:

Our Collateral Management suite of services includes comprehensive transactional Due Diligence, Appraisals, Feasibility Studies, Deal Vetting, Credit Analysis and Analytics, Risk Assessments, Project Management, Collateral Reviews, Environmental Compliance Reviews, Account Monitoring, Independent Auditing, Field Inspections, Asset Tagging, UCC Filings, and periodic onsite compliance inspections.

Our specialists work closely with the client and their legal representatives to analyze and determine their institutional and regulatory requirements. After establishing goals and objectives, our compliance teams prepare comprehensive due diligence protocols, develop account and site-specific strategies, and visit the client’s location(s). We meet with borrowers and site management personnel to communicate the level of compliance its creditor requires courteously and professionally, leaving no room for interpretation.

Our distinctive Distressed Asset Management, Turnaround Management, Collateral Management, and Risk-Mitigation Services reduce risk and bring our clients the safety, comfort, flexibility, and confidence to increase credit to existing customers and to seek out and book new business opportunities where others cannot.

EDS’s unparalleled level of expertise is recognized and appreciated in boardrooms and courtrooms throughout the world. How may we be of service to you?

Contact Us Now!