How Receivership Works

Both John R. Foley and Patrick A. Foley accept receivership appointments. John has served as receiver in commercial and personal matters referred by the state circuit courts. Patrick focuses on business receiverships and matters with significant financial or operational complexity, and has represented receivers in federal bankruptcy matters and served as counsel in receivership estates since early in his career.

What a Receiver Is

A receiver is an officer of the court, not an advocate for any party. When property is at risk, because the people who control it are deadlocked, cannot be trusted with it, or are not paying what they owe, the court can take the property out of their hands and put it in the hands of a neutral receiver. The receiver answers to the judge and acts for the benefit of everyone with a legitimate interest in the property.

Michigan circuit courts have broad authority to appoint receivers, including under MCL 600.2926, and the procedure is governed by MCR 2.622. Federal courts appoint receivers as well, and receivers often work alongside bankruptcy proceedings.

When Courts Appoint a Receiver

• Business disputes among owners. Shareholder and member deadlocks, oppression claims, and dissolutions, where the business needs neutral management until the dispute is resolved or the business is sold.
• Business divorces and divorces with a business. When a family business or significant asset is part of a contested divorce and neither spouse can be left in control.
• Collecting a judgment. When a judgment debtor has assets, income, or a business but will not pay, a receiver can take control of them and apply them to the judgment.
• Real estate and lender remedies. Collecting rents and preserving a property during a foreclosure or a default on a commercial loan.
• Estates and trusts. When a fiduciary dispute leaves an asset without anyone who can safely manage it.

The Appointment Order

Everything a receiver may do comes from the order appointing the receiver. The order identifies the property in the receivership, the receiver’s powers, any bond the receiver must post, how the receiver is to report, and how the receiver is paid. A well-drafted order is the single most important document in a receivership, and the firm regularly helps courts and counsel shape it so that the receiver has the authority the situation needs and no more.

What the Receiver Does

• Takes possession and control. The receiver secures the property, its books and records, its bank accounts, and its keys and passwords.
• Inventories and reports. The receiver identifies what the property is, what it is worth, and what is owed against it, and reports to the court and the parties.
• Operates or preserves. If the receivership holds a running business, the receiver may keep it operating, pay employees and vendors, collect receivables, and maintain insurance. If it holds real estate, the receiver collects rents and keeps the property maintained and insured.
• Investigates. The receiver can examine transactions and records, and with court approval pursue claims to recover assets that were taken or transferred.
• Sells, with court approval. When the order allows it, the receiver markets and sells the property for the best price available. Sales are made on notice to the parties and approved by the court.
• Distributes. Proceeds are paid out as the court directs, in the order of priority the law requires.

Oversight and Discharge

The receiver files regular reports and accountings, and any party can bring a concern to the judge. The receiver’s own fees, and those of any professionals the receiver hires, are paid from the receivership estate only as the court approves. When the receivership’s purpose is accomplished, the receiver files a final report and accounting, and the court discharges the receiver and releases any bond.

Proposing a Receiver

Counsel who want to propose John or Patrick as receiver, or who are considering whether a receivership is the right remedy, can contact the firm. The firm will check for conflicts, confirm that the appointee has no interest in the outcome, and can assist with a proposed appointment order.