Generally, receiverships accrue from business disputes or real estate foreclosures. On occasion, Receivers are appointed to oversee assets in a divorce proceeding. In criminal proceedings where assets (usually a business) are jeopardized, a judge will appoint a Receiver. In certain situations, impatient creditors can petition the court to establish a receivership.
A Receiver is appointed by the court as the result of a lawsuit. While the lawsuit is taking place, the parties may petition the Court for the protection afforded by receivership. The Receiver, in plain English, is a caretaker of assets, with the authority and power of the Court. The Receiver is responsible for protecting real property or an ongoing business that might be hurt by problematic management or by lack of proper management.
Ideally, a Receiver would take over a business or property and provide practical improvements. Often, because of limited resources, the Receiver becomes limited in his ability to make ambitious changes and thus, becomes a caretaker manager. In this instance, preservation of the asset becomes paramount.
Ultimately, a cash-strapped entity is liquidated—either sold as an entity or broken into component parts and sold to maximize the return to its owners or creditors.
Court Orders appointing Receivers must be specific as to the responsibilities of the Receiver and provide the Receiver with quasi-judicial authority. The ordering Judge has the ultimate authority, with the Receiver as second-in-command in the receivership. The Receiver works independently of the parties, effectively answering only to the Judge who appointed him.