Business Divorce and Receiverships

Corporate dissolution petitions under BCL 1104 (deadlock) and BCL 1104-a (oppression, looting, waste by holders of twenty percent or more of a non-public corporation) carry the power to appoint a receiver under BCL 1113 and 1202 during the proceeding. LLC dissolution runs through LLC Law 702, with a receiver or liquidating trustee available under LLC Law 703. Partnership dissolutions use Partnership Law 69.

In parallel, CPLR 6401 supports a temporary receiver over specific property in any pending action, which is often the faster route while the dissolution petition is briefed.

The BCL 1118 election — the purchase of a petitioner's shares at fair value — frequently reshapes the case once filed, and a pending receivership motion is what usually prompts it.

Judges dislike putting a stranger in charge of a functioning business. Before a receiver, they will consider a court-appointed monitor with information rights, dual signature requirements on accounts, a forensic accounting, an interim distribution formula, an injunction against transfers outside the ordinary course, or a buy-sell process with a valuation date.

A party seeking a receiver should explain why each of those is inadequate. A party opposing should offer the strongest one and be prepared to live with it.

In an operating receivership over a closely held business, the receiver becomes the decision-maker on payroll, vendors, banking, leases, licenses, and often on whether to sell. The owners keep their equity and their claims but lose the levers.

Practical consequences follow quickly: lender covenant defaults, franchise agreement issues, license and permit notification requirements, key-employee flight, and vendor credit tightening. Those consequences are the reason receivership motions so often produce settlements before decision.