When Receiverships Collide With Bankruptcy: Practical Lessons From The U.S. And Canada

Receiverships and bankruptcy proceedings often share objectives, including preserving value, centralizing control and maximizing recoveries, but involve different decision-makers and different statutory frameworks. Those differences matter, particularly when a distressed business has assets, creditors or legal proceedings on both sides of the U.S./Canada border.

In Canada, court-appointed receiverships have emerged as a common enforcement tool used by secured creditors to manage collateral assets pending a court-supervised sale and vesting order. In the U.S., receiverships are also used by secured creditors to control collateral assets, but a later bankruptcy filing can presumptively displace the receiver unless the bankruptcy court excuses turnover under § 543 of the Bankruptcy Code. This article highlights practical points for cross-border practitioners when receivership proceedings collide with bankruptcy relief.