Saving on time, money, and hassle are always surefire ways to increase profitability in business. Constantly improving to save in all three ways is one of the best paths to maximize the potential of resources already available. This is why we want to share how receiverships have the potential to save you time, money, and hassle. When an investment is not being handled properly, creditors can attempt to force involuntary bankruptcy upon the company in question. Rather than take this risk, they can do something much quicker and more structured: petition the court to appoint a receiver to take control of the disputed asset. Never heard of a commercial receivership? Check out our guide to what is commercial receivership before reading on. Now, here are three ways a receivership can save you time, money, and a lot of unnecessary hassle.

Time

Between the administrative and legal work, bankruptcy proceedings can take a long time to reach a conclusion. In the case of forcing involuntary bankruptcy, the creditor may never reach actual bankruptcy proceedings. Court proceedings take time, the paperwork outside the courtroom is labor-intensive. This is time-consuming for everyone involved and limits the time debtors can devote to the company. Lost time often results in lost money for someone. For the creditor, involuntary bankruptcy forces them to wait several months before gaining control over their assets. A receivership solves this by avoiding that lengthy process to get control over assets. In many cases, a creditor can get into court in 10 days. Additionally, a receivership signals to debtors that a creditor means business and they are about to lose control over the asset if they do not sort out a solution. This often quickly causes settlement negotiations to begin.

Money

When creditors or shareholders enter into a dispute with the company they finance or oversee, the company often suffers. When shareholders dispute ownership or returns, some may walk away from the company. Creditors or financiers will often hold up the flow of money. Managers or executives can also find themselves sidetracked by the disagreement. In any situation, the company suffers. Additionally, the creditor could be seeking a receivership because the company was already being mismanaged. A receivership ensures that the company retains its value or increases while a long-term solution is sought for the creditor.

Specific operations or the entire company can be handed over to the receiver by the court. Because the role is dynamic, receiverships are an incredibly effective tool for protecting assets. Their speed and versatility allow failing assets to quickly be secured and improved. Additionally, the receiver’s new management perspective often leads to improvements and even increased value.

Hassle

Receiverships can lessen the stress brought on by bankruptcy. When pursuing involuntary bankruptcy claims, the creditors are taking a risk to prove insolvency, and the debtors are devoting serious time to argue against their insolvency. When creditors ask for a court-appointed receiver instead, both parties are assured that the asset will be protected while the debt negotiations or a dispute is settled. Managing the company is no longer the responsibility of the parties dealing with a legal dispute.

Additionally, a receiver provides transparency into the company. The structure of the receivership is tied to the transparency of operations and verifiable results. All parties are aware of the statutory rules and what can be asked for or ordered by the court. The receiver must report to the judge regularly. They must answer to someone but they are independent of the disagreeing parties. This makes entering into a receivership process less unknowable and less risky.

Finally, most creditors or investors are not interested in running a company. They are financers for a reason. A receiver solves this potential problem by standing in to run the company effectively while the ownership remains under the name of the debtor (rather than transfer ownership to the creditor). The lender can remain a lender and will not have to take on liabilities, debts, and general business tasks.

Conclusion

Time and money are important resources in any business. Additionally, physical and mental stress strains companies and can hurt productivity. Bankruptcy places particular burdens on businesses. The proceedings complicate the management of time, money, and raise overall stress. Disputes between partners can cause discord throughout an organization that prevents the company from running efficiently. When the goal is to preserve and increase the value of an investment, a receiver helps support that goal while creditors work to find a long-term solution. By using a receiver, the creditor can rely on someone to independently preserve the asset in question while they focus on resolving the dispute.

Enjoying these insights? We strive to offer insightful resources and tools to nonprofits and small businesses throughout our site on a regular basis. Check out our blogs and make sure to follow our social media pages to stay updated on new insights.

Contact NMBL Today!

Featured