Receivership is often considered when other remedies would be inadequate, providing a flexible alternative to more rigid legal processes like traditional litigation. It's particularly valuable when parties are unable to cooperate effectively to preserve assets or business operations during a dispute.
Below, our attorneys at Hendershot Cowart P.C. explain more about receiverships in Texas.
What Is Receivership in Texas?
Receivership in Texas is a legal remedy where a court appoints a neutral third party (the receiver) to take custody, control, and management of disputed assets or business operations. It's governed by both equitable principles and statutory law under the Texas Civil Practice & Remedies Code Chapter 64.
In Texas, receivership serves as a powerful tool for:
- Collecting unpaid judgments. Receivers can take control of a debtor's non-exempt property to satisfy court judgments
- Resolving complex business disputes. Receiverships are particularly useful in shareholder and partnership conflicts where business operations are at risk
- Preserving property value. Receivers protect and manage assets during litigation to prevent deterioration or loss
- Handling business insolvency. For companies that are insolvent or near insolvency, receivers can manage assets and settle creditor claims
- Addressing fraud. Receivers can take control of assets, issue subpoenas, and recover fraudulently transferred property
In Texas specifically, receivers must be neutral parties with no interest in the case, and they must be Texas citizens and qualified voters. The court can tailor the receiver's powers to fit the specific circumstances of each case.
Filing for Receivership in Texas
If there's no existing litigation, work with a litigation attorney to file an original petition that includes a request for receivership. If litigation is already pending, your attorney can file a motion for appointment of a receiver within the existing case.
Your filing must establish specific grounds for receivership. You must show:
- You have a probable interest in or right to the property or fund;
- The property or fund is in danger of being lost, removed, or materially injured; and
- A less drastic remedy (like a temporary injunction) would not adequately protect the property.
Receivership is considered an extraordinary remedy in Texas, so courts require clear evidence that it's necessary and that less intrusive remedies would be inadequate. Having experienced legal counsel is particularly important for navigating this complex process.
Who Can Serve as Receiver in a Texas Receivership?
Although not always required, it can be helpful to suggest qualified candidates for the receiver position.
The proposed receiver must be:
- A Texas citizen and qualified voter
- Neutral and independent from all parties in the dispute
- Qualified to manage the specific property or business
Scenarios Where Receiverships Can Help Resolve Complex Disputes in Texas
Consider these scenarios in which a receivership could help resolve a complex dispute in Texas:
Deadlocked Business Partners
Two 50/50 business partners reach an impasse where they cannot agree on company operations. One partner wants to sell the business while the other wants to continue operations, leading to gridlock that threatens the company's survival. A receiver can be appointed to:
- Take control of day-to-day operations
- Maintain business value during the dispute
- Evaluate whether selling or continuing operations is in the best interest of the company
- Implement a resolution and potentially oversee a buy-out or sale
Judgment Collection from Evasive Debtors
A creditor obtains a judgment against a debtor who attempts to hide assets or transfer them to avoid payment. A receivership allows:
- The receiver to take control of the debtor's non-exempt assets
- Investigate and recover fraudulently transferred property
- Subpoena financial records to locate hidden assets
- Liquidate assets efficiently to satisfy the judgment
- Bypass more cumbersome collection procedures
Suspected Corporate Fraud
Minority shareholders suspect the majority shareholder is engaging in self-dealing and diverting company assets. A receiver can:
- Take control of the company's operations and records
- Conduct forensic accounting to identify improper transactions
- Preserve business value while investigating allegations
- Recover diverted assets
- Implement controls to prevent future misconduct
Dissolution of Professional Practices
Doctors in a medical practice or attorneys in a law firm have irreconcilable differences and cannot agree on how to divide clients, equipment, and ongoing cases. A receiver could:
- Manage the practice during the dispute
- Ensure client/patient needs continue to be met
- Oversee fair division of assets and responsibilities
- Implement an orderly wind-down if necessary
- Protect confidential information and records
In each of these scenarios, the receiver serves as a neutral, court-appointed third party who can make decisions when the disputing parties cannot, helping to preserve assets and business value while working toward resolution.
How Receivers Are Compensated in Texas
Receivers in Texas are generally compensated in one of three ways:
- Hourly Rates: Most common for complex cases, with rates typically ranging from $150-$500+ per hour depending on the receiver's experience and the complexity of the matter.
- Percentage of Assets: Some receivers are paid a percentage of the assets they manage or recover, often between 1.5% to 5% depending on the size and complexity of the estate.
- Flat Fee: Less common, but sometimes used for specific receivership tasks or smaller matters with predictable scope.
Who Pays?
Which party bears the cost of the receivership depends on the circumstances of the dispute:
- From the Receivership Estate: Most commonly, the receiver is paid from the assets they're managing. This is standard in cases with sufficient assets.
- From the Requesting Party: In some cases, especially where assets are limited, the court may order the party who requested the receivership to advance or pay the receiver's fees.
- Shared Between Parties: In certain disputes, the court may order all parties to contribute to the receiver's compensation.
When Business Disputes Threaten Your Company's Future, Don't Wait to Take Action
If you find yourself in a business deadlock, partnership dispute, or any situation where company assets are at risk, seeking experienced legal counsel immediately is crucial. A qualified Texas attorney with receivership experience can help you protect your interests and determine if receivership is the right solution for your situation.
Contact our firm today to discuss how we can help you navigate complex business disputes and preserve the value of your assets. Our attorneys have extensive experience with Texas receivership proceedings and can guide you through each step of the process.
Call (713) 783-3110 to schedule a confidential consultation with one of our Texas business litigation attorneys. The sooner you act, the more options you'll have to protect what you've built.