What is a Receivership?

By Vethan Law Firm

MR. SANDBERG: Hi, my name is Jens Sandberg, and I’m an associate attorney here with the Vethan Law Firm. And to my right is my colleague, Elena Bolonina who is an associate as well in the Houston office. And today’s video as a part of the Vethan Law Firm’s video education series, is on the topic of receiverships. So, Elena, what is a receivership? MS. BOLONINA: Usually minority shareholder ask the Court to appoint the receiver in order to stop majority shareholders from doing certain illegal acts. So what kind of acts can it be? MR. SANDBERG: So what you have to show ln order to be entitled to receiver are four different things that you can hit any one of them. They are all not required. The first one is if the company is insolvent or threatened to be insolvent. The second one is if there is a deadlock in management or decision making authority. If you have a 50/50 split on a decision, then you can appoint a receiver. The third and probably the most common is when the control persons of a company are taking acts that are illegal, oppressive, and fraudulent. And the fourth is when you find out that company property is being misapplied or wasted. MS. BOLONINA: So, receiver has broad powers and basically you can include a lot of things in your order for judge to sign. The usual powers of receiver are request accounting firm to come and do accounting for you, to hire and fire employees including the ones in the top of the company and many more. MR. SANDBERG: So, if you find yourself in a position as a shareholder, as an equity member, that you’re not receiving the financials, that the control persons are taking bonuses or awarding themselves with company property such as cars, then you need to act and that’s when you need to be on the look out for an order to appoint a receiver. MS. BOLONINA: We are happy to help you at the Vethan Law Firm. We are just one call away. And remember, your problem is our business.