When a business defaults on a loan, it impacts everyone involved—most notably lenders and creditors. To mitigate potential losses and resolve loan-related disputes, banks and secured creditors will often acquire a court-appointed receiver to ensure the maximum recovery of their assets.
At Farber, we have extensive experience acting as court-appointed receivers, helping secured creditors recover outstanding amounts under secured loans. We also work as an independent court officer, helping other parties (i.e., shareholders) resolve complex disputes, such as facilitating the completion of a project, liquidating assets or selling a business.
How receiverships work
A receivership can be arranged in one of two ways—either by a secured creditor, which is considered a “privately-appointed receivership”, or by the court on behalf of a secured creditor, which is called a “court-appointed receivership”.
The difference between the two is relatively simple: in a privately-appointed receivership, the receiver works solely on behalf of the secured creditor to retrieve the assets outlined in the loan agreement. In a court-appointed receivership, however, the receiver is considered an officer of the court. In light of this, their responsibility is to work on behalf of all creditors—and their powers and rights are outlined in the court order that appointed them.
In both cases, the receiver’s job is to take possession of, and sell or liquidate, any relevant assets, with the intention of repaying the outstanding debt. In a court appointed receivership, the receiver is also responsible for notifying all creditors of the receivership and providing regular status updates either to the official receiver/the court.
A business-minded approach
At Farber, we see receiverships through an entrepreneurial lens—and strive to uncover the best path forward for all involved. This often involves delving a little deeper, understanding the root causes of a business’s financial set-backs, and finding a solution that both maximizes the lender’s or creditor’s returns, while simultaneously protecting the business owners’ interests.