Simon PLC Attorneys & Counselors – January 2026 Memorandum
Choosing a receiver wisely: Nationwide considerations in choosing a receiver.
Troy, MI — The use of receivership to assist creditors dates back to medieval English courts and was known to be used during the reign of Queen Elizabeth I. The concept traveled to the New World and was utilized by equity courts in the American colonies. After the United States became independent, American courts retained the equitable power to appoint receivers. Each state has its own history regarding receiverships. For instance, a number of Michigan Supreme Court decisions from the 1800s involved disputes in which the parties sought receiverships. See generally Hon. Mark A. Goldsmith & Gregory J. DeMars, Receiverships in the Real Estate Setting, Mich Bus LJ, Summer 2008, at 36–37; Myron Keys, Appointment of Receivers in Mortgage and Land Contract Cases, 2 Det L Rev 157 (1931–1932). Clearly, this mechanism has a long and storied history in American jurisprudence.
While receivership is generally a creature of state law, provisions are often similar between states. (The following states have adopted the Uniform Commercial Real Estate Receivership Act: Alabama, Arizona, Connecticut, Florida, Maryland, Michigan, Nevada, North Carolina, Oregon, Rhode Island, Tennessee, Utah and Virginia.) In this memorandum, we will examine Michigan law on receiverships. On March 26, 2014, the Michigan Supreme Court adopted amendments to MCR 2.621 and 2.622 to govern certain aspects of receivership cases commenced in Michigan circuit courts. The Receivership Act, MCL 554.1011 et seq., was substantially amended by 2020 PA 210. Among other changes, the Receivership Act was amended to apply generally to most receiverships, rather than to only those involving real property.
So, what should a party do if it is in need of a receivership? How can it find the right receiver for its situation? The statutes provide guidance. MCR 2.622 prescribes a detailed procedure for the appointment of a receiver in pending litigation and a determination of qualifications for this post. This procedure also permits a party to raise an objection to the appointment of a receiver solely selected by the court.
The party seeking the appointment of a receiver in litigation will typically file a motion early in the case, requesting that the Court appoint a person nominated by that party to act as a receiver. The motion should specify (1) the grounds justifying the appointment; (2) the person nominated to act as a receiver; and (3) that person’s qualifications for the position and their competence, and experience. Affidavits often accompany the motion detailing the facts supporting the appointment request and the nominee’s suitability for the position.
Courts generally look favorably upon a nominee proposed by a party. However, there are certain persons who are disqualified from servings as receiver or “in any other professional capacity representing or assisting the receiver” under amended MCR 2.622(B)(6). The following persons or entities are disqualified from serving as a court-appointed receiver or from rendering professional assistance to a receiver in a civil action pending in state court:
- a nominee who is a creditor or a holder of an equity interest in the receivership estate
- a nominee who is or was an investment banker for any outstanding security of the receivership estate
- a nominee who has been, within three years before the date the receiver was appointed, an investment banker for a security of the receivership estate, or an attorney for such a banker, in connection with the offer, sale, or issuance of a security of the receivership estate
- a nominee who is or was, within two years before a receiver was appointed, a director, officer, or employee of the receivership estate or an investment banker within the scope of (b) or (c) above, unless the court determines that “the appointment is in the best interest of the receivership estate and that there is no actual conflict of interest” on account of the proposed employment
- a nominee who has a materially adverse interest to any class of creditors or equity security holders due to “any direct or indirect relationship to, connection with, or interest in the receivership estate or an investment banker,” or for any other reason
- a nominee who has or represents an interest adverse to the receivership estate or occupies a position with respect to the receivership litigation “that would tend to interfere with the impartial discharge of duties as an officer of the court”
- a nominee who has, at any time within five years before the appointment of a receiver, represented or been employed by the receivership estate or any secured creditor of the receivership estate “as an attorney, accountant, appraiser, or in any other professional capacity” and the court determines that an “actual conflict of interest” exists on account of the representation or employment
- a nominee who is an insider, as that term is defined in the Uniform Fraudulent Transfer Act as adopted in Michigan, MCL 566.31(i), and which includes a director, officer, or person in control of a corporation when that entity is the subject of the receivership litigation
- a nominee who represents or is employed by a creditor of the receivership estate and, on an interested party’s objection, the court finds an “actual conflict of interest” would result from the proposed representation or employment
- a nominee who holds a relationship to the receivership litigation that “will interfere with the impartial discharge of the receiver’s duties”
- a nominee who is a creditor or a holder of an equity interest in the receivership estate
- a nominee who is or was an investment banker for any outstanding security of the receivership estate
- a nominee who has been, within three years before the date the receiver was appointed, an investment banker for a security of the receivership estate, or an attorney for such a banker, in connection with the offer, sale, or issuance of a security of the receivership estate
- a nominee who is or was, within two years before a receiver was appointed, a director, officer, or employee of the receivership estate or an investment banker within the scope of (b) or (c) above, unless the court determines that “the appointment is in the best interest of the receivership estate and that there is no actual conflict of interest” on account of the proposed employment
- a nominee who has a materially adverse interest to any class of creditors or equity security holders due to “any direct or indirect relationship to, connection with, or interest in the receivership estate or an investment banker,” or for any other reason
- a nominee who has or represents an interest adverse to the receivership estate or occupies a position with respect to the receivership litigation “that would tend to interfere with the impartial discharge of duties as an officer of the court”
- a nominee who has, at any time within five years before the appointment of a receiver, represented or been employed by the receivership estate or any secured creditor of the receivership estate “as an attorney, accountant, appraiser, or in any other professional capacity” and the court determines that an “actual conflict of interest” exists on account of the representation or employment
- a nominee who is an insider, as that term is defined in the Uniform Fraudulent Transfer Act as adopted in Michigan, MCL 566.31(i), and which includes a director, officer, or person in control of a corporation when that entity is the subject of the receivership litigation
- a nominee who represents or is employed by a creditor of the receivership estate and, on an interested party’s objection, the court finds an “actual conflict of interest” would result from the proposed representation or employment
- a nominee who holds a relationship to the receivership litigation that “will interfere with the impartial discharge of the receiver’s duties”
Thus, a party requesting a receiver should be careful not to nominate a person or entity who could be disqualified by falling into any of these categories. According to MCR 2.622(B), “[e]very receiver selected by the court must have sufficient competence, qualifications, and experience to administer the receivership estate.” The party requesting the appointment must show how the receiver nominee meets these competence standards. In doing so, the moving party in its motion or in the parties’ stipulation must consider the following factors listed in MCR 2.622(B)(5):
- the nominee’s experience in the operation and/or liquidation of the type of assets subject to administration
- the nominee’s relevant business, legal, and receivership knowledge
- the nominee’s ability to obtain the required bonding if more than a nominal bond is ordered
- any objections to the receiver’s appointment
- whether the nominee is disqualified from appointment under MCR 2.622(B)(6)
A nominated receiver should be a person or entity who is unbiased, has experience acting as a receiver, can obtain sufficient bonding, has good financial acumen, is unafraid to make difficult decisions to support the receivership estate, has experience in the operation or liquidation of the type of assets at issue, is not disqualified, and has a can-do attitude. In addition, some familiarity with the Court and the Judge involved can be helpful, although not an absolute necessity. Many people report the best results come from using someone with extensive experience in serving as a receiver, such as Frank R. Simon of Simon PLC Attorneys & Counselors. With decades of experience, Frank R. Simon has successfully handled receiverships across the country, big and small, in all types of businesses, and recovered hundreds of millions for creditors. The choice of receiver can be crucial to a successful outcome, and parties should choose carefully to receive the best possible results from the process.
N.B. Not Legal Advice: Please contact us if you would like to discuss the facts and circumstances of your specific matter. Simon PLC Attorneys & Counselors expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this memorandum. The information contained herein may not reflect current legal developments and is provided without any knowledge as to the recipient’s location, industry, identity or specific circumstances. No recipients of this content, clients or otherwise, should act, or refrain from acting, on the basis of any content included in this memorandum without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the jurisdiction for which the recipient’s legal issue(s) involve. The application and impact of relevant laws varies from jurisdiction to jurisdiction, and our attorneys do not seek to practice law in states, territories and foreign countries where they are not properly authorized to do so.
