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Receiverships can become an issue in business litigation

On Behalf of | Nov 23, 2022 | Business Law & Litigation

When talking about business litigation, people often get bogged down by costs. How much will the lawyers cost? How much are they suing me for? How much is this whole thing going to cost me? However, in some Sacramento, California, cases, it could cost you your entire business, even before you lose the case.

Receivership in general

Receivership is when a judge appoints a third party to take legal possession of your business and/or its assets. This third party is known as the receiver, and they act as an arm for the judge and are empowered by that judge.

Losing the business during litigation

A receiver can be appointed to take over your business and its assets during business litigation, even while the case is ongoing. This means that, even if you think you have a good case, the judge can still take away your business, even if it is just temporarily.

California receivership

California receivership law is contained in state’s Code of Civil Procedure, Section 564. Cases that put your business and assets at issue can include a receivership designation. If there is a worry that you may commit fraud or waste business assets, a receiver designation may occur. Creditor cases commonly include a receivership designation request from the creditor, especially if it is the federal government. Business litigation between owners and investors also commonly include receivership requests.

For northern California business owners, the key takeaway is that, if you are involved in business litigation where a business interest or asset is involved, you should expect the other party to ask for a receiver. Talk with your lawyer about this possibility and plan for it.