How to Get a Receiver Appointed


A recent article in the Daily DAC, a newsletter focused on corporate insolvency, discussed the above-referenced topic.

And while it made several interesting and educational points, the writer was based in Minnesota, and the article demonstrated the importance of understanding the issues and ways of getting a receiver appointed according to the rules of the state where the receivership is being requested.

Receivership laws are different in each state, and Minnesota law, while having some commonality with Washington law, is also very different in a number of respects.



For example, the article begins by stating Receiverships are most often commenced by creditors, but they can be commenced by an equity holder as well.

The first step towards a receivership is to initiate a lawsuit.

Most commonly, the lawsuit is filed for breach of contract and is seeking foreclosure or repayment of collateral. Appointment can also be sought as an independent action but is less common.

In Washington, this would not be the case. Many receiverships are initiated through the process of an Assignment for the Benefit of Creditors.



This process, while separate from a receivership, allows a company to initiate the insolvency process itself without either a lawsuit or court process. Once the assignee accepts the assignment, it is the assignee that initiates the receivership.

The article goes on to state that the next step is to bring a motion for the appointment of a receiver. It suggests that to maintain a good relationship with the lender, it’s a great idea to seek a mutual appointment.

It’s important to note that where an assignment for the benefit of creditors is used in Washington, the assignment is required to be on behalf of all the creditors.

Section 7.08.010 of the statute states: No general assignment of property by an insolvent, or in contemplation of insolvency, for the benefit of creditors, shall be valid unless it be made for the benefit of all of the assignor’s creditors in proportion to the amount of their respective claims.



Once converted to a receivership, the receivership statutes in Washington state the order and priority of the payments made by the insolvent estate.

Lenders with contractually secured UCC filings have the highest priorities, followed by other creditors with UCC filings. Where there are conflicts, the priority is established by the date of the UCC filing.  Following these priorities come unsecured debt (trade debt) and lastly equity.

This particular article stresses the way to get a receiver appointed in Minnesota and deals with the legal actions necessary in that state.

In Washington, some statutes are similar to other states, while there can be significant differences. When doing internet searches, especially related to insolvency and state laws, it is important to focus on a number of factors related to the decision.

The state of Washington has, what are considered to be, some of the strongest receivership laws in the country.



A major decision is if a federal bankruptcy or state receivership is the right decision for your organization.

To make that decision, be certain that the attorney you select has experience in both processes.

Make certain that your attorney can explain which process is best for the company and for you personally.

While moving from a receivership to bankruptcy is relatively straightforward, going in the other direction is highly problematic.



Another issue is affordability. The federal process is generally more expensive than a state receivership due to certain costs mandated in the bankruptcy code.

A qualified assignee/receiver will make certain that funds are available or will become available during the process.

If funding does not become available, it is a relatively easy process to terminate a receivership.

Federal bankruptcy statutes provide solutions for dealing with a lack of funding which are more complex.



Lastly, it is important to select an assignee/receiver that you can work with as the process moves forward.

The objective is to maximize the returns from the estate to the creditors.

The debtor is represented by counsel, the secured lender is most probably represented by counsel.

Some trade creditors and those owing the estate have counsel.

Each of these is seeking the best returns for their particular situation.

Knowing that your selected assignee/receiver has the experience to manage the various parties and can work with you to maximize the returns in accordance with the statutes, will provide the most piece of mind in what is always a stressful situation.

Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering, a State Receivership or Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.

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Over the years, through our many assignments, the Principals of Revitalization Partners frequently said to ourselves: “One day, we should write a book about our work and how we can help companies through our experiences.” This is that book and we hope that you find words of value to you and your business.

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