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What Is A Receivership, And Why Do Businesses Use Them?

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Not every DUI conviction results in jail time, but almost all defendants who plead guilty to drunk driving or get a guilty verdict at trial get their driver’s licenses suspended.  In many DUI cases, once you get your driver’s license back, the court requires you to use an ignition interlock device, which is a breathalyzer attached to your steering wheel that stops the car from turning on if your blood alcohol content is above the legal limit.  A receivership is like an ignition interlock device for your business.  The business still belongs to you, and you are entitled to your share of the profits from it, but a court-appointed trustee is the one who has the right to make financial transactions on behalf of the business.  Receiverships sometimes get involved with businesses to save them from the brink of bankruptcy, and sometimes the business is already on its way out, and the receiver just makes the process of dissolution less costly and less ugly than it would otherwise be.  If things have gotten bad enough for your company that there is talk of receivership, contact a Washington DC business dispute lawyer.

Corporate Restructuring

A corporate restructuring occurs when a company is experiencing severe financial distress, and outside experts come in to save it from bankruptcy and make it profitable again.  This usually involves appointing a receiver.  If the problems all relate to one creditor, then the creditor may choose the receiver, but it cannot be someone who has a pre-existing relationship with the creditor or with the business undergoing restructuring.  If the business owes money to multiple creditors, the court chooses the receiver, but the court is not involved in the day-to-day operations of the receivership.

Business Dissolution

Sometimes a receivership is sufficient to help a business avoid bankruptcy, but sometimes the only option is dissolution of the business, with or without a bankruptcy filing.  If things have gotten so bad between the business partners that they cannot work together without constant conflict, then bringing in a receiver is often the fastest and least expensive way to dissolve the business and settle its debts.

When Business Partners Can’t Trust Each Other

If the business partners are being dishonest with each other or openly going against each other’s decisions, a receivership is an effective way of bringing in a neutral party to accomplish the tasks at hand.  Depending on the specifics, the end goal can be to return the business to profitability, to dissolve the business entirely, or to buy out the ownership share of one of the owners.  In any case, no one resorts to receivership when everything is going well with the business.  If the problems in your business partnership are so serious that you are discussing receivership, you should also work with your own business dispute lawyer.

Contact Tobin O’Connor Ewing About Receivership and Other Business Emergencies

A Washington, D.C. business dispute lawyer can help you if your business venture is plagued with unpaid debts and conflict among business partners.  Contact Tobin, O’Connor & Ewing for help.

Source:

investopedia.com/terms/r/receivership.asp

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