When most people think of receiverships, they picture foreclosed real estate or distressed companies with familiar assets. But not every case fits neatly into that mold. Sometimes, receivers are asked to manage assets that are unconventional, difficult to value, or loaded with unique legal obligations.
Unusual receivership assets demand creativity, legal savvy, and financial discipline. By reviewing several unique scenarios below, we’ll highlight just how adaptable receiverships can be.
Why Receiverships Are Gaining Attention
Receiverships are gaining traction as an alternative to bankruptcy in cases involving unusual or sensitive assets. State legislatures, including Missouri, with its Commercial Receivership Act, are updating statutes to provide clearer authority.
Part of the growing popularity of receiverships stems from their efficiency. Bankruptcy cases can be lengthy and expensive, while receiverships often move faster and with fewer administrative costs. This can be particularly attractive in mid-market cases where time and money are limited.
Legislative reforms, such as those in Missouri and other states, aim to standardize procedures and give courts clearer guidance. As these reforms spread, practitioners expect receiverships to be used more frequently, even in industries that historically relied on bankruptcy.
Receiverships as Flexible Legal Tools
Receivership is a state-law remedy that allows a neutral third party, the receiver, to step in and preserve, manage, or sell assets. Unlike bankruptcy, which is a federal process, receiverships operate in state courts and can be tailored to the circumstances of a case.
As Eric Peterson of Spencer Fane LLP notes, “The beauty of receivership is its flexibility. You can craft an appointment order that fits the unique facts, but that flexibility also means you need to be precise. The order is your roadmap.”
That roadmap is particularly important when the assets are non-traditional. Appointment orders should define the receiver’s powers clearly, anticipate regulatory or industry-specific hurdles, and secure funding sources for administration.
Receiverships often work best when the appointment order is drafted with creativity. Courts can authorize the receiver not only to take custody of assets but also to operate businesses, sell assets as going concerns, or engage with regulators. This flexibility distinguishes receiverships from more rigid bankruptcy procedures.
Still, the flip side of flexibility is uncertainty. Because receiverships are governed primarily by state law, standards and practices can vary widely. In some jurisdictions, judges are very familiar with commercial receiverships, and in others, less so. That means parties should not assume consistency from one case to another.
Livestock Operations
Few assets create more complexity than a living herd. Brent King of B. Riley Financial has worked on agricultural receiverships involving pork processing, beef and dairy production, and crop operations. He emphasizes that the receiver’s role is not just financial but operational.
“From farrow to harvest, you’re talking about herd management, feed, growth monitoring, and animal welfare. These aren’t just numbers on a balance sheet; these are living assets,” advises King.
Livestock raises immediate concerns about funding. Feed costs are daily and non-negotiable, and a cash-strapped estate may have no liquidity. Courts must often approve emergency financing to preserve herd value. Environmental and animal welfare regulations add further oversight.
The operational challenges go beyond feed and veterinary care. A receiver may also need to manage breeding schedules, disease prevention protocols, and contracts with processors or distributors. Weather, commodity prices, and biosecurity issues can all influence herd value. Failure to act quickly can turn a viable operation into a distressed liquidation within weeks.
Financial reporting also plays a role. Lenders and courts need transparency on herd counts, feed usage, and mortality rates. Receivers often must implement rapid reporting systems to reassure stakeholders that value is being preserved.
Fertility Clinics and the Question of Frozen Embryos
Perhaps no example captures the legal and ethical complexity of unusual receivership assets better than fertility clinics.
“You can’t just treat frozen embryos like equipment. State laws differ on whether they’re considered property or potential persons, and you have to deal with patients, regulators, and law enforcement all at once,” cautions Jeremiah Foster of Resolute Commercial.
Receivership of fertility clinics requires careful mapping of the asset pool: medical equipment, lab inventory, intellectual property, and patient contracts. But frozen embryos raise thorny questions. Some states impose restrictions on transfer or destruction, and recent legal debates after the fall of Roe v. Wade have intensified scrutiny.
Receivership in a healthcare setting also implicates confidentiality laws. Patient records are protected under HIPAA, meaning the receiver must maintain strict compliance in how data is accessed, stored, or transferred. This can require special training for staff and careful coordination with regulators.
The ethical dimensions are particularly acute with embryos. Courts may need to consider questions of consent if former patients cannot be located or disagree on disposition. In some states, public policy leans toward treating embryos as property, while in others, courts are cautious about authorizing their destruction or transfer. These conflicting approaches place receivers in sensitive positions where legal advice is critical.
Auto Dealerships
Auto dealerships appear straightforward at first glance, but as Baker Smith of BDO Consulting Group, LLC points out, they are ‘ecosystems’ with layers of financial and legal complexity: “Cash flow doesn’t come from sales alone; it’s manufacturer rebates, finance and insurance, service, and parts. If you don’t understand that ecosystem, you won’t understand the value.”
Receivers of dealerships must navigate floor plan financing arrangements, where vehicles on the lot are financed by lenders. If cars are sold ‘out of trust,’ without repaying the floor plan lender, it can quickly spiral into fraud allegations. Curtailment obligations, title transfers, and manufacturer approvals add more hurdles.
Service departments and parts inventories are often the most profitable components of dealerships. Preserving staff in these areas can be essential to maintaining going-concern value. However, labor contracts and customer warranties complicate matters, and receivers must quickly determine which obligations they can and cannot honor.
Marketing and reputation management also matter. Unlike some businesses, dealerships depend heavily on community perception and repeat customers. A receiver stepping in must balance immediate cost-cutting with long-term brand value.
The Commonalities
Though the assets differ in each scenario, certain themes emerge across them all:
- The Appointment Order is critical. It defines the receiver’s powers and can shield them from liability.
- Funding must be addressed early. From feed to payroll, many unusual assets require immediate cash infusions.
- Industry expertise matters. Receivers may need to hire specialists, i.e., veterinarians, lab directors, dealership managers, to stabilize operations.
- Stakeholder management is essential. Patients, regulators, and employees all require communication and coordination.
Another recurring theme is the tension between speed and thoroughness. Courts and creditors often want a fast resolution, but rushing can create mistakes, such as overlooking regulatory filings or mishandling sensitive assets, that generate liability. Receivers must strike a balance between moving quickly enough to preserve value and carefully enough to avoid errors.
Funding sources can also be creative. Some courts authorize receiver’s certificates, which function like high-priority loans secured by estate assets. While helpful, they can be controversial among existing creditors because they alter repayment priorities.
Conclusion
Receiverships may never replace bankruptcy, but as more courts embrace their adaptability, they will remain a vital tool for handling the assets that don’t fit the mold.
When approaching a receivership, practitioners should:
- Secure funding immediately. Without cash, herds starve, employees leave, and patients panic.
- Assess insurance coverage early. Liability insurance for directors, officers, or healthcare providers may extend to receivership operations, but only if policies are preserved and premiums kept current.
- Draft the appointment order carefully. Anticipate regulatory, ethical, and operational issues.
- Engage industry experts early. Don’t assume a generalist can manage a specialized business.
- Prioritize communication. Transparency with stakeholders builds trust and avoids disputes.
- Plan for exit. Whether through asset sales, transitions to new operators, or wind-downs, know the likely endgame.