For northwest Ohio business owners, “receivership” is a four-letter word.
In business litigation, a receiver is appointed by a judge to take over your business and business assets. The receiver acts as an arm for the court, work on the judge’s behalf and works according to the Order Appointing Receiver. A receiver can be appointed in both state and federal business litigation.
Who selects the receiver or asks for one?
If you and your business are sued, the person or entity suing you will likely ask the judge for a receiver. When that happens, the judge will determine whether a receiver is needed to preserve and maintain your business (during the litigation). If the judge finds that your business needs protection from you to prevent fraud, abuse, waste, etc., then, the court can empower the receiver to take over your business. Of course, both parties can file motions for their preferred receivers, but ultimately, the judge selects whoever they believe will protect the business and its assets.
Which lawsuits should I worry about?
First, in almost any business litigation where the federal government is a party, you need to prepare for receiver litigation. For example, as policy, the Securities and Exchange Commission nearly universally requests a receiver for businesses they sue. Any litigation where your business’s assets are at issue or could be utilized for a payout could involve receivership.
Mitigate risks now
In some businesses, you can get bonds and insurance to mitigate the risk of receivership. Business insurance is always a need, but talking with your attorney can make sure that you have some protection. In addition, your Ohio, attorney can go through your business practices, human resources policies and contracts to make sure you also mitigate the risk of litigation now.