Receivership

In law, receivership is the situation in which an institution or enterprise is being held by a receiver, a person "placed in the custodial responsibility for the property of others, including tangible and intangible assets and rights", especially in cases where a company cannot meet its financial obligations or enters bankruptcy. The receivership remedy is an equitable remedy that emerged in the English Chancery courts, where receivers were appointed to protect real property. Receiverships are also a remedy of last resort in litigation involving the conduct of executive agencies that fail to comply with constitutional or statutory obligations to populations that rely on those agencies for their basic human rights.

Receiverships can be broadly divided into two types: those which related to insolvency or the enforcement of a security interest, and those where a person is either incapable of managing their affairs and so the court appoints a receiver to manage the property on their behalf, for example a receiver appointed by the Court of Protection under Mental Health legislation (in some jurisdictions this form of receivership is referred to as conservatorship), or the Government is exercising power to seize control of property due to breaches of the law of regulation. Receiverships relating to insolvency can be subdivided into two further categories - administrative receivership, where the receiver is appointed over all or substantially all of the property of a business and the receiver has wide management powers, and other receiverships (sometimes misleadingly called "fixed charge receiverships") where the receiver is only appointed over limited specific property, and has no broader management powers beyond managing and/or selling the individual asset.

Receivers can be appointed in different ways:

The receiver's powers "flow from the document(s) underlying his appointment"—i.e., a statute, financing agreement, or court order.

The receiver may:

Several regulatory entities have been granted power by the Congress to place banking and financial institutions into receivership like the Office of the Comptroller of the Currency for failing nationally chartered commercial banks; the Office of Thrift Supervision for failing savings and loan associations (thrift institutions); and the Federal Housing Finance Agency (FHFA) for government-sponsored enterprises (GSEs) such as Fannie Mae, Freddie Mac, and the 11 Federal Home Loan Banks. Most individual states also have granted receivership authority to their own bank regulatory agencies and insurance regulators. State Insurance Departments are accredited by the National Association of Insurance Commissioners (NAIC) which requires, "State law should set forth a receivership scheme for the administration, by the insurance commissioner, of insurance companies found to be insolvent as set forth in the NAIC’s Insurer Receivership Model Act."

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Wikipedia