The California Code of Civil Procedure Section 564 lists many of the traditional types of cases in which receivers may be appointed. They include, but are not limited to, the following: Preservation of a common fund or property in dispute and in danger of injury or dissipation;Rents, Issues and Profits (Real Estate);Substandard Housing – The…
What are the powers of a court receiver?
Read about the duties and responsibilities of a Los Angeles Court Receiver.
The powers of a Los Angeles court receiver are identified in the order appointing the receiver. Depending upon the type of receivership, the powers of the receiver may be broad or they may be limited. A limited purpose rents and profits receiver generally holds real property pending the outcome of a foreclosure or other action as deemed appropriate by the court. This type of receiver has narrow duties. An equity receiver has broad powers and is the receiver over the entity itself as opposed to only being appointed as receiver over the security for a loan.
The receiver has the power to take possession of the receivership assets as defined in the order appointing the receiver. This may also include business personal property, computers, documents, records, leases, contracts, mail, intellectual property, accounts receivables, and other property of the business. the receiver may also be appointed as a tiebreaker over a business. This may include being appointed as a provisional manager of a business.
The receiver may have the ability to change the mailing address for business-related mail as well as directing tenants to pay the receiver all rent. The same holds true for accounts receivable and customers of the receivership entity. Computers may be imaged, websites may be controlled and company phone systems may be modified as needed in order to properly administer the receivership estate.
Computer and website passwords as well as codes to locks, safes, and other items are obtained pursuant to court order. Assuming the court grants the receiver the authority, the receiver transfer title of vehicles, liquor licenses, and business licenses. Depending on the scope of the order appointing the receiver, the receiver may take possession of all tax documents for the receivership entity and the receiver may be empowered to sign tax returns on behalf of the company and/or the receivership estate.
Court-appointed receivers may also retain professionals pursuant to court order. This includes hiring lawyers, accountants, brokers, appraisers, private investigators, computer forensic professionals, title, escrow, and auctioneers. The receiver may also hire and fire employees, vendors and may even have the power to reject contracts.
One powerful duty of a receiver includes the ability to defend or prosecute lawsuits. In fact, a receiver has a duty to do so if empowered by the court and it is incumbent upon a receiver to carefully analyze claims being made against the receivership entity as well as analyzing and identifying claims the receivership entity may hold against 3rd parties. These assets may be very valuable.
Borrowing money is another important power. A receiver can borrow money through the issuance of court-approved borrowing certificates. These borrowing certificates provide for superiority liens and are issued pursuant to court order. The payback period, interest rate, and terms of the borrowing certificate are at the discretion of the receiver and court. It is important that notice is provided to any lienholders that may be subordinated by any borrowing certificate.
Bank accounts, credit cards, authorized debit processors, investment accounts, and other security instruments may be under the control of the receiver. Some of these assets may be liquidated for cash. The receiver may also have the power to hire security guards to safeguard the receivership estate assets.
The receiver must only take action consistent with the order appointing the receiver or subsequent orders. Orders appointing receivers may contain very broad authority and this authority may be modified as the case progresses. Generally, receivers appointed in federal court as Federal equity receivers will have broader power than California, Arizona, or Nevada rents and profits receivers appointed in state court; however, as discussed, orders appointing receivers may be broadened and changed as deemed appropriate by the Court.
A receivership can be structured in a variety of ways based on the nature of the dispute, the goals and objectives of the parties, the type of asset(s) that will be placed under the control of a receiver as well as the ruling of the court. There are two core types of receiverships – a…