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Maryland receivership law

On Behalf of | Nov 23, 2022 | Business & Commercial, Business Litigation

Running a business is complicated, and there are risks at every turn. Every time you make decisions, sign a contract, find a vendor, etc., you are potentially, exposing you and your business to legal liability and business litigation in Baltimore, Maryland. One such risk is receivership.

What is receivership?

In some business litigation, the court processing the case can appoint a receiver over your business, its assets or both. This is a neutral, third-party appointed by the judge who also works for the judge. Their job is to protect the business and assets. There is no receivership cause of action. However, depending on the nature of your case, the judge could unilaterally appoint a receiver, or the suing party could ask for one.

State and federal cases

Receivers can be appointed in both state and federal cases. However, if a United States federal agency is involved in the litigation, a receiver will likely be requested, especially if the business litigation involves the Securities and Exchange Commission.

Maryland receivership law

In our state, receiverships are governed by the Maryland Commercial Code, Section 24-201. In state-court proceedings, a receiver can be appointed for your business or business assets if they are the subject of the case. However, the judge must find that the business assets or business itself are at risk of waste, loss, dissipation or impairment. Alternatively, if there has already been some alleged fraud, including a voidable conveyance, a receiver may be requested and appointed.

If you have lost a judgment, you could also lose your business and assets to a receiver, even if there is a pending appeal. If one of your business associates or partners are seeking to dissolve the business, they can also ask for a receiver.

Business litigation

Baltimore, Maryland, business litigation can have devastating consequences. If a business asset or your business itself is the subject of the lawsuit, you should prepare for a receivership fight. Take demand letters and litigation threats seriously because your very business could be at risk.