Choosing a receiver wisely: Nationwide considerations in choosing a receiver

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.

Receivership as an Equitable Remedy

Receivership is considered an equitable remedy because it allows courts to intervene directly and fairly in situations where parties are unable to protect or manage significant property interests or assets themselves. Rather than providing a purely monetary solution, the court appoints a neutral third party—a receiver—to preserve, administer, or sometimes liquidate assets. This hands-on approach ensures that all parties’ interests are considered and protected while the dispute is resolved. The decision to appoint a receiver rests within the court’s equitable powers, and is often used when there is a real risk that assets could be wasted, mismanaged, or lost before final judgment. By entrusting the property to an impartial receiver, the court maintains control and oversight, fostering fairness and stability during what is typically an uncertain and contentious process.

Commencing a Receivership as an Independent Action

It’s also worth noting that receiverships are not always tethered to an existing lawsuit. In Michigan, and in most jurisdictions, a party may initiate a receivership as a stand-alone proceeding—seeking the court’s appointment of a receiver without first filing another cause of action. However, this approach is far less common than seeking receivership relief in the context of ongoing litigation. Most receiverships arise as ancillary remedies to pending disputes rather than as independent matters.

Importance of Precisely Defining the Receivership Estate

One critical element when crafting a proposed receivership order is careful identification of the property over which the receiver will take control. If the order does not specifically list or describe the assets included, Michigan law presumes the receiver will oversee all property held by the entity in question—regardless of type or location. This catch-all approach can expand the receiver’s authority far beyond what was originally intended by the parties or the court.

To avoid confusion or unwanted disputes later, the parties should take care to enumerate or otherwise clearly define the property that will fall under receivership at the outset. This simple step ensures that both the scope of the receiver’s responsibilities and the rights of all stakeholders are understood up front.

Lawsuits Where Receivership is Commonly Sought

Receivership is not limited to one side of a dispute—while it is most frequently pursued by creditors seeking to protect their interests, equity holders may also request a receiver in certain circumstances. Typically, receivership is sought within lawsuits involving breach of contract, particularly when foreclosure or recovery of secured assets is at stake. These actions often arise when a creditor wishes to safeguard collateral or prevent further dissipation of assets during litigation.

Thus, breach of contract suits that revolve around real estate, loan defaults, and commercial disputes are prominent contexts where parties look to the court for the appointment of a receiver. In each case, the primary objective remains the same: to maintain and preserve property until the court reaches a final resolution.

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.

Situations Warranting Appointment of a Receiver as Part of a Judgment

Michigan courts, echoing historical roots in equity, may appoint a receiver under various circumstances to protect assets and ensure the efficacy of a judgment. Frequently, a receiver is appointed to oversee the implementation of a judgment—essentially acting as the court’s representative to manage and preserve property while litigation is ongoing or after a decision has been reached. Common scenarios include:

Judgment Enforcement: When a party obtains a judgment but collection is threatened or complex, the court may appoint a receiver to marshal, safeguard, or liquidate assets, ensuring the judgment is satisfied.
Dissolution of Corporations: If a corporation is being dissolved (voluntarily or involuntarily), a receiver may be necessary to wind up business affairs, distribute assets to creditors, and resolve outstanding claims.
Suspected Fraud or Mismanagement: In cases involving allegations of fraud, misappropriation, or gross mismanagement within a business entity, courts may rely on a receiver to take control, protect assets from further harm, and conduct an independent accounting.

This judicial tool ensures an impartial third party oversees critical asset transitions, providing a layer of protection for creditors and other interested parties when disputes jeopardize the stability or integrity of the underlying assets.

When Are Receivers Appointed Over Corporations?

Receivers can play a vital role in a variety of corporate contexts. Courts may appoint a receiver as part of enforcing a judgment, ensuring that assets are preserved and the judgment is properly executed. Appointment of a receiver is also common when a corporation is in the process of being dissolved or is anticipated to dissolve, to safeguard and manage the company’s remaining assets during this transition. Additionally, courts have the authority to install a receiver in cases involving allegations of fraud or misconduct within a corporation. This step is often taken to protect assets, prevent further harm, and facilitate an orderly process for creditors and stakeholders. In each of these scenarios, the receiver serves as a neutral party tasked with managing corporate assets under court supervision.

Powers and Duties of Receivers in Limited and General Receiverships

No matter whether a receivership is characterized as limited or general, a receiver’s authority typically includes two main areas of responsibility. First, the receiver is empowered to take charge of property that is subject to the receivership order—this means assuming control, oversight, and preservation of assets as directed by the court. Second, the receiver may incur reasonable expenses necessary to maintain, protect, or operate the property at issue. These expenses must generally be accounted for and reported, ensuring transparency in the administration of the receivership estate. In summary, whether the scope is narrow or broad, the receiver steps into the shoes of the owner with respect to management and financial decisions, all under the careful supervision of the court.

Receiverships in Michigan: Who May Seek Appointment?

A receivership, at its core, is a judicial process in which a court appoints an independent third party—known as the receiver—to take custody of and manage property that is the subject of a dispute. In Michigan circuit courts, receiverships are most commonly initiated by creditors who are seeking to preserve and protect collateral that may otherwise be lost, wasted, or dissipated during litigation. Yet, it is not solely creditors who may utilize this tool. Equity holders—such as business owners, partners, or shareholders—also have the authority to request the appointment of a receiver if they can demonstrate a legitimate need, for example, to protect the value of a business or to prevent harm to assets during a dispute. The path to a receivership typically begins with the filing of a lawsuit. In many cases, this lawsuit alleges breach of contract and may involve foreclosure, default on loans, or issues relating to ownership interests. While receivership actions are frequently joined with other claims, Michigan law also allows for a request for appointment of a receiver to be made through an independent action, although this practice is less common. In summary, state court receiverships are available to a broad set of parties with an interest in disputed assets—not just creditors, but also equity participants seeking to safeguard property under threat.

Distinguishing Limited and General Receiverships

Michigan law recognizes two principal categories of receiverships: limited and general. When an order appointing a receiver does not expressly indicate which type is being imposed, the law presumes the appointment is for a limited receivership.

A limited receivership is restricted to specific assets or property. Here, the receiver’s duties are narrowly tailored—they step in to safeguard, preserve, and manage only the particular property named in the court’s order. For example, a receiver may be appointed solely over a commercial building, with authority limited to operating, maintaining, and protecting that property.

In contrast, a general receivership vests the receiver with much broader powers, typically over an entire business entity. In this role, the receiver effectively assumes the position of principal executive, overseeing all business operations. With court approval, a general receiver possesses the authority to take actions such as:

Operating the business as a going concern;
Initiating or defending litigation related to the estate;
Selling the receivership property, if necessary for the benefit of creditors;
Pursuing claims under statutory provisions relating to fraudulent or avoidable transactions.

Both limited and general receivers can incur and manage expenses, and are tasked with the management and protection of property subject to the receivership. However, only a general receiver enjoys the full scope of powers necessary to run a business, resolve claims, and liquidate assets as appropriate to the circumstances of the case.

This distinction is critical in determining both the receiver’s authority and the potential outcomes for creditors and stakeholders involved.

Unique Powers of a General Receiver

Michigan law distinguishes between different types of receivers, and the appointment of a general receiver comes with specific authorities not available to all receivers. A general receiver is uniquely empowered to:

Initiate actions to set aside fraudulent or avoidable transactions under applicable statutes, such as the Uniform Voidable Transactions Act.
Manage and operate the business under receivership as an ongoing enterprise, maintaining normal business operations when so ordered by the court.
Request, and if authorized by the court, sell receivership property—whether some or all assets—to satisfy creditor claims or advance the receivership’s objectives.

These additional powers are not automatically granted to all receivers, making the selection of a general receiver particularly significant when such authority may be crucial to the outcome of the case.

The Court’s Role and Authority in Receivership

Courts play a central role throughout the receivership process. It is the court that determines whether a receiver should be appointed in the first place, and once appointed, the receiver acts as an agent of the court—not merely of the parties. The court retains ongoing oversight, setting the parameters of the receiver’s powers, directing the actions the receiver may take, and supervising management or disposition of the property in question. All significant actions by the receiver, such as the sale of assets or distribution of funds, typically require court approval, ensuring the process remains under judicial control. This judicial supervision acts as a safeguard for the interests of all parties involved—creditors, debtors, and any others with property at stake.

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.

Ex Parte Appointments: When Is Immediate Action Justified?

Occasionally, circumstances arise where the usual notice and hearing process is too slow to prevent harm. In such situations, a court has authority to appoint a receiver on an ex parte basis—meaning without advance notice to the other side—if there is an urgent need to protect property or prevent irreparable injury. This approach is typically reserved for emergencies, such as when a creditor can convincingly show that waiting even a short period would result in significant loss or damage. The appointment may be temporary, remaining in effect only until a formal hearing can be held with all parties present.

The party seeking an ex parte appointment must therefore be prepared to present clear, credible evidence underscoring the necessity for immediate judicial intervention.

Receiverships are most often commenced by creditors, though an equity holder may also initiate the process. The first step toward a receivership is to file a lawsuit—most commonly for breach of contract, seeking foreclosure, or repayment of collateral.
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.
This initial procedure establishes the legal foundation for the receivership and allows the court to evaluate both the need for a receiver and the qualifications of the proposed nominee.

Who Bears the Cost When Receivership Funds Are Lacking?

In situations where the receivership estate lacks sufficient assets to cover the costs of administration, it is typically the party who requested the receivership—most often the lender—who must step in to provide the necessary funding. Courts recognize that a receiver cannot work without resources, and they frequently expect the moving party to underwrite the receivership’s expenses until the estate generates or recovers adequate funds. This practical point is an important consideration for any lender or creditor seeking the appointment of a receiver: financial responsibility may fall squarely on their shoulders if the estate itself cannot sustain the receivership.

The Importance of Crafting a Comprehensive Receivership Order

Once a party steps forward to nominate a receiver, the next crucial step is to carefully draft a proposed receivership order. Why? Because the receivership order serves as the blueprint for the receiver’s authority, responsibilities, and the scope of property they control. If the order isn’t specific about which assets fall under the receiver’s purview, Michigan courts presume the receiver is responsible for the entirety of the entity’s property—sometimes a much broader charge than the parties anticipated.

The court’s role doesn’t end with simply appointing a receiver. Judges retain exclusive authority to determine what powers and duties the receiver will have and to set clear boundaries within which the receiver may operate. By thoughtfully defining these terms in the proposed order, parties help ensure clarity regarding the receiver’s role and avoid unnecessary disputes down the line. This foresight not only strengthens a party’s position but also assists the court in efficiently managing the receivership process.

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)

Mutual Appointment: Benefits for Creditors and Borrowers

When the relationship between creditor and borrower remains respectful and cooperative—even in the face of a dispute—pursuing a mutually agreed-upon receiver often proves advantageous for both sides. This collaborative approach can sidestep costly disputes over the receiver’s selection, reducing both legal expenses and animosity. By agreeing on a receiver, the parties not only expedite the appointment process, but they also ensure that the chosen individual is acceptable and trusted by both sides, minimizing concerns about bias or perceived partiality.

Mutual agreement also brings clarity and confidence to the process: the receiver can enter their duties with the backing of both parties, likely leading to swifter stabilization of troubled assets and a more efficient resolution. Courts tend to view such cooperation favorably, recognizing that a mutually appointed receiver may facilitate smoother case administration.

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.

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.

That said, one often-overlooked but critical step is to learn about the judge’s background. Many state court judges do not have experience in receivership matters, or even in general business practices. This makes it especially important, when proposing a receiver, to clearly explain in court filings and hearings the purpose of the receivership, the specific responsibilities of the receiver, and why the nominee is particularly suited to the case. Providing this context not only assists the judge in understanding the complexities of the proceeding but can also set the stage for a smoother and more efficient administration of the receivership estate.

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.

Memorandum, National Receiver