Business
receivership is seldom the best way. Here are better choices.
Naturally, bankruptcy is a last choice for most business owners.
However, if you as a business owner recognize signs of impending
trouble, you should know there is an alternative to a lengthy
and expensive bankruptcy. This alternative is business receivership.
The Benefits Of Business Receivership
There are many benefits to business receivership over bankruptcy.
First there is less stigma attached to business receivership
than bankruptcy. Second, there is an increased chance your
troubled business can survive.
Third, business receivership is quicker and cheaper than bankruptcy.
Why is this true? There are less mandated reporting and court
hearings with receivership. And this alone tends to lower the
stress of everyone involved.
Finally a major benefit of business receivership is that it
allows for creativity to rescue company holdings. This means
the company can possibly still continue on as a going concern.
Unlike a bankruptcy filing, receivership often allows the company
to keep more of its assets.
So what happens when a company enters into this process?
Let me explain how it works.
In a receivership, the state court will act as a referee in
the proceedings. The court appoints a receiver who has a trustee
duty to the court.
The receiver maximizes the value of the estate and decides
the best way to protect all creditors and shareholders involved.
Often the receiver will liquidate the assets of the business
and shut it down. But this is not always the case. The outcome
of a receivership often depends on various things like the
causes of the business problems, the amount of remaining money
and possibility for the business to continue running.
Further, anyone going into this process should understand
that it is not free. It is indeed less expensive than a bankruptcy.
But the court pays receivers by the hour and there may be other
fees such as an incentive fee if the receiver does a good job.
And a competent receiver can make all the difference when
a troubled business needs to survive. He or she may even work
closely with key employees to handle sales, marketing, production
and financial matters efficiently.
If there is no hope for the business in the end, a well-appointed
receiver can ensure that everyone involved receives more money
than would normally be possible through a bankruptcy. If it
becomes necessary for the company to be sold, the final price
tag can be improved because the business is worth more if it
can be run as a going concern.
Potential
problems for owners with failing businesses
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