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ARTICLE · 15 APRIL 2024

Don't Disrespect The Receivership

Ward and Smith, P.A
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The North Carolina Commercial Receivership Act celebrated its three-year anniversary in January, and we are beginning to see how it can be a powerful weapon for creditors who need to take control...

United StatesInsolvency/Bankruptcy/Re-Structuring
Lilian L. Faulconer
Lilian L. Faulconer
Lance Martin
Lance Martin

A recent decision by the North Carolina Business Court highlights the risks of interfering with property that is part of a receivership estate.

The North Carolina Commercial Receivership Act celebrated its three-year anniversary in January, and we are beginning to see how it can be a powerful weapon for creditors who need to take control of an uncooperative corporate borrower but don't want to pursue an involuntary bankruptcy. In a receivership, the court, upon request from a creditor, appoints an independent party, the receiver, to take control of and responsibility for the assets of a business. Think of it as bankruptcy in state court.

There are two types of receiverships: general and limited. In a general receivership, the receiver is like a trustee in bankruptcy, acting to preserve assets, operate the business for a period of time, or oversee liquidation and distribute proceeds to creditors. In a limited receivership, the receiver controls a portion of

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