Relation Between Section 291 Receiver Proceedings And Involuntary Bankruptcy Actions

In prior posts we have discussed receivership actions commenced under Section 291 of the Delaware General Corporation Law ("DGCL"). As a recap, under Section 291, a creditor may petition the Court of Chancery to place a receiver over an insolvent Delaware corporation. What is noteworthy about a Section 291 action is that a sole creditor may petition the Court for the appointment of a receiver, regardless of the size of the corporation.

By contrast, under the United States Bankruptcy Code, when filing an involuntary bankruptcy action against a company, if the involuntary debtor has 12 or more creditors, then at least three creditors would be required to file an involuntary bankruptcy petition. 11 U.S.C.§ 303(b)(1).