Common Mistakes Made During Receiverships
Most receivership problems trace back to a handful of avoidable mistakes, and nearly all of them happen in the first thirty days.
1. A vague appointing order
Orders that say the receiver shall take possession of the business and manage it, without more, produce months of motion practice. Every material power — operate, borrow, lease, sell, settle, terminate employees, retain professionals, pay pre-appointment claims — should appear expressly, along with reporting intervals and a compensation framework.
2. Acting before qualifying
CPLR 6402 and 6403 require the oath and undertaking before the receiver acts. Receivers who take possession first create a challenge to everything they did and expose themselves personally. File first, then act.
3. Commingling or sloppy banking
- Using an existing company account instead of a new receivership account.
- Leaving merchant processing pointed at the old account.
- Paying expenses in cash without documentation.
- Failing to reconcile monthly.
- Paying yourself or your firm before an approved application.
4. Missing regulatory and tax obligations
Liquor licenses, cannabis licenses, food permits, sales tax, payroll tax, workers compensation, and insurance renewals do not pause for litigation. A lapse can destroy more value than the entire dispute. Build a compliance calendar in week one and confirm who is filing what.
5. Communicating like a party
Taking calls from one side, sharing analysis unevenly, or adopting a party's characterization of the facts undermines the appointment. Route substantive communications through counsel, copy all parties on material information, and document the neutral basis for decisions.
6. Reconstructing time records later
Fee applications are decided on contemporaneous records. Narratives assembled at the end, block-billed and undifferentiated between receiver work and legal work, get cut. Keep entries daily, separate categories, and tie work to outcomes.
7. Waiting to ask the court
When facts change — a buyer appears, a lease is at risk, cash runs short, a party refuses to turn over records — the answer is an application for instructions, promptly. Receivers get into trouble by making irreversible decisions quietly and explaining them afterward.
8. No exit plan
Receiverships that drift accumulate fees and hostility. From the outset there should be a working thesis for how this ends — sale, buyout, handback, or wind-down — with milestones the receiver reports against.
New York Receivership Guide
What every business owner should know before seeking — or opposing — a receiver.
- The CPLR 6401 standard, in plain language
- What to put in (and keep out of) the appointment order
- What receiverships actually cost
- Alternatives courts prefer, and how to propose them
Frequently asked questions
Receivership questions are fact-specific. These answers are general information, not legal advice for your matter.
Yes. Courts remove receivers for partiality, failure to account, exceeding authority, neglect, or conflicts. Removal can be accompanied by denial of compensation and a surcharge.
Inadequate records. After that: duplication between the receiver and counsel, work outside the order's scope, and expenses disproportionate to the estate.
Document specific failures, request the reports and accountings due under the order, and if that does not resolve it, move for instructions, for an accounting, or for removal.
Negotiate a detailed order, agree on a budget, resolve document access early, avoid duplicative professionals, and settle the underlying dispute — the receivership ends when the case does.
Seeking a receiver, opposing one, or considering an appointment?
Part 36 approved receiver and receivership counsel for New York City and Long Island matters.