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Do business owners need to worry about receivership?

On Behalf of | Sep 26, 2022 | Business Litigation

You have a lot to deal with as a business owner, and litigation just makes that job so much more complicated. Indeed, one of the many issues that pop up in Egg Harbor Township, New Jersey, business litigation is the possibility of receivership.

What is receivership?

Receivership is the legal term used when a court (both at the New Jersey state and federal level) appoints a receiver to takes possession of a business and its assets (or any specified property). The receiver is a neutral, third-party custodian of that property, and they act as an extension of the court.

When is a receivership used?

When the state or federal judge believes the business or business assets will deteriorate, lose value or be mismanaged by the litigant owner, the court will appoint a receiver. This is a temporary appointment that ends when the litigation ends. Either party can move to have a receiver appointed, but the judge ultimately decides if a receivership is needed during the trial.

However, in litigation with the federal government, it is typical to ask for a receiver. For example, the SEC almost uniformly asks for a receiver because, if they are bringing a lawsuit, they believe the entity and business owners will waste company assets.

The receiver’s powers

The receiver’s powers, duties and responsibilities are outlined in the judge’s order that appoints the receiver. At a minimum, they are charged to take legal control and possession of the business and its assets. Then, they are charged with filing claims on behalf of that entity, if there are any, and ultimately, they will be charged with either distributing assets, selling the business or relinquishing control back to the original owner. The court’s goal is to ensure that assets are not lost, concealed or squandered.

How is the receiver selected?

The judge selects the receiver. However, both parties can provide who they want to be the receiver, but the ultimate decision is still up to the judge, who may use one of the provided receivers or another of their own choosing. This is because the receiver is deemed an officer of the court who answers directly to the judge.


In any business or commercial litigation, whether at the New Jersey or federal level, receivership can be a concern for business owners. This is why it is so important to have an Egg Harbor Township, New Jersey, attorney ready to fight on your behalf.