Receivers and receiverships are frequently overlooked – but should be considered useful and effective tools as a means of alternative dispute resolutions (ADR). In the right situation and with the right receiver the appointment of a receiver can and should be cost effective!
Using a court-appointed receiver to manage a business of a closely held corporation is an effective way to preserve the business and provide stability to its employees while the shareholders resolve their disputes. Under the right circumstances, receivership presents several benefits. Upon appointment – and depending on the responsibilities as outlined in the court order – a receiver will take control of the business and secure the assets. The receiver is usually required to report to the court on some predetermined basis, usually monthly.
The receiver enjoys the confidence of the court that appointed him or her and in some cases the attorneys involved in the dispute. A receiver, trained in forensic accounting, can effectively investigate the finances of a business and report wrongdoing – if so instructed.
Like a bankruptcy trustee, the receiver is not responsible for unpaid expenses incurred by the debtor prior to the receiver’s appointment or executory contracts entered into by the borrower. But the receiver does take estate property subject to properly perfected security interests.
Mr. Umlauf was asked for his input, by a state court judge, in obtaining a solution to a complicated embezzlement case. By mutual agreement of the attorneys Mr. Umlauf was appointed the Courts Expert for purposes of determining the amount of the embezzlement which was determined to be $2.4M.
The attorneys also mutually agreed Mr. Umlauf would act as a receiver for the purpose of marshaling the assets for the benefit of the victim. Mr. Umlauf’s forensic skills and that of his associates enabled him to recover in excess of $1.8M for the benefit of the victim. This could only have been accomplished through the concept of team work and the attorney’s mutual desire to minimize the loss to the victim.