Receiverships are a powerful tool for creditors seeking to preserve the assets of an insolvent corporation or limited liability company (“LLC”). A receiver is a neutral party, appointed by the court to maintain the status quo and ensure the assets of a corporation or individual are preserved during certain proceedings. A receiver may be appointed by a superior or district court judge, however, only a superior court judge may appoint a receiver of a corporation. A civil action must be filed with a North Carolina court before a party may move for a receivership.
North Carolina permits creditors to seek the appointment of a receiver if litigation is pending or a judgment has been obtained. A creditor seeking the appointment of a receiver must establish that a corporation is insolvent or in danger of becoming insolvent. Generally, a court may appoint a receiver in the following situations:
To preserve property (or the value thereof) pending the outcome of litigation;
To aid in the execution of a judgment;
To preserve property pending an appeal;
To facilitate the dissolution of a corporation or LLC; and
To maintain and preserve property which is owned by a foreign corporation located within North Carolina.
After a motion for receivership is filed, the court will hold a hearing to determine the appropriateness of a receivership. Typically, an attorney with experience in debtor-creditor relations is appointed, however, banks, corporations, and other entities may also be appointed when specific experience and expertise is required.
Once appointed, a receiver has wide authority, including the power to take possession and control of financial accounts, real property, and personal property, liquidate and sell property, and file lawsuits on behalf of the party subject to the receivership. A receiver is an officer of the court, and all parties must cooperate and abide by the order appointing the receiver. Failure to do so may subject a party to sanctions by the court.
An appointed receivership is an effective tool to help prevent a debtor from wasting and destroying assets. We have attorneys who can perform receivership duties.
If you have a claim against a North Carolina debtor and are concerned that company’s assets are being wasted, misused, or lost, please call us at 336-723-7200 for an appointment.