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Receivership in Action

Business divorces and marital divorces may appear quite different on the surface, but both can benefit significantly from the involvement of an objective third party. One way to accomplish that is receivership, which can be as useful as a Swiss Army knife when it comes to legal matters. Business litigators, divorce attorneys, and probate litigators can use a receiver to resolve a wide range of family law and contested estate matters.

The right to appoint a receiver is statutory in Arizona. The receiver marshals, manages, protects, preserves and enhances the receivership assets for the benefit of the receivership estate. The duties are performed with court oversight and as set forth in the receivership order, not for any specific party.

Contentious situations can benefit in a number of ways from receiverships:

Preserving and Protecting Assets

A receiver begins the process with triage, ensuring that money and other assets do not disappear or dissipate due to improper controls over the business or family property/interests. In the case of a marriage headed for divorce, for example, husband might be running a business without his wife’s involvement. Suddenly, funds are being directed to a new related company, but she doesn’t have any control. A business dispute may have similar dynamics—for example, one of the partners is receiving an unauthorized salary or transferring assets without company authority. With a court order, and a receiver who’s authorized to seize control of the assets, the playing field can be leveled: All parties have access to the same information, which is governed by a neutral official.

Taking Corrective Action

Having assumed control over the financials in a business or other property, the receiver next takes corrective action steps. In the case of a business, that may mean creating an accounting system to provide information to all interested parties. The receiver reports to the court and continues to do the required ongoing monitoring. In family law circumstances, the receiver can take action to ensure that community assets are not dissipated or otherwise threatened.

Bringing Matters to Resolution

To bring business matters to resolution, a receiver may offer a valuation, recommend dissolution options or mediate a new operational agreement—up to and including sale of the assets. In a divorce, the receiver may be responsible to the court for resolution of a wide range of issues; most commonly, these would include the preservation of assets and family-owned businesses or the sale and disbursement of marital assets (e.g., liquidation of real estate).

Leveling the Playing Field With Receivership

Family law circumstances, business disputes, probate and trust matters often boil down to suspicion and distrust. As a court-appointed and supervised remedy, receivership is often the most effective way for parties to come to terms.

Arizona does not yet have the body of statutory provisions and case law seen in California, which is at the head of the pack in receivership. Currently, Arizona receivership appointments are very common in loan default proceedings; increasing numbers of judges and attorneys are seeing its utility in marital divorces, closely held business disputes and contested estates. A well-executed receivership can ultimately be less costly than extended litigation—as well as an expedited way to achieve equitable resolution.

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