All
business
owners
naturally
fear
the
terms
"receivership"
and
"liquidation".
Oftentimes,
these
terms
are
used
interchangeably
to
describe
the
downfall
of
a
company.
That
comparison
is
misleading.
While
it's
true
that
appointing
either
a
receiver
or
a
liquidator
indicates
that
a
company
is
in
serious
financial
trouble,
there
are
crucial
differences
between
these
two
processes.
In
this
article,
we'll
discuss
what
receivership
and
liquidation
have
in
common
and
what
sets
them
apart.
Defining
Receivership
&
Liquidation
In
a
previous
blog
article,
we
explained
that receivership is
a
debt
restructuring
process.
A
court-appointed
receiver
is
a
neutral,
third-party
professional
whose
duty
is
to
manage
the
company's
assets
during
the
lawsuit
in
an
effort
to
repay
creditors
and
resume
profitable
operations.
Liquidation,
also
known
as
"winding
up",
is
the
process
in
which
a
liquidator
collects
and
sells
the
company's
assets
and
then
distributes
the
proceeds
among
the
creditors
to
pay
off
debts
owed.
Once
the
interests
of
the
creditors
are
met,
the
company
is
officially
dissolved.
What
Do
Receivership
&
Liquidation
Have
in
Common?
-
Management
Relinquishes
Control. The
company's
management
will
need
to
step
down
and
hand
over
legal
control
of
their
business
operations
and
its
assets
to
either
the
receiver
or
the
liquidator.
-
Repaying
Debt
is
the
Primary
Objective. The
ultimate
goal
of
both
court-appointed
receivership
and
liquidation
is
to
pay
off
accrued
debts
to
all
of
the
company's
creditors,
according
to
their
priority.
-
Each
Process
is
Well-Documented. The
appointed
professional,
whether
a
receiver
or
a
liquidator,
is
responsible
for
regularly
filing
reports
to
document
the
company's
progress
in
repaying
debts.
What
Sets
Them
Apart?
-
The
Outcomes. Receivership
offers
an
insolvent
company
the
opportunity
to
recover
and
resume
business
operations.
Once
the
receiver
has
fulfilled
their
appointed
role,
the
company
can
oftentimes
be
handed
back
to
its
directors
and
shareholders.
In
contrast,
liquidation
always
ends
in
the
termination
of
the
business
and
its
removal
from
the
registrar
of
companies.
-
Whose
Interests
are
Represented. A
court-appointed
receiver
acts
on
behalf
of
both
the
company
and
the
creditors
in
order
to
reach
repayment
negotiations
that
benefit
both
parties.
A
liquidator,
on
the
other
hand,
purely
represents
the
interests
of
the
creditors
and
shareholders.
-
Management's
Involvement. In
receivership,
the
owner
of
a
company
maintains
a
limited
role
in
the
debt
restructuring
process.
Liquidation
completely
eliminates
the
roles
of
the
owner
and
directors
and
operates
without
their
input.
-
Trading
Ability. Since
a
receiver
strives
to
keep
the
company
afloat
and
viable,
they
can
continue
to
trade
while
receivership
takes
place.
A
liquidator
cannot
continue
trading.
How
Can
Dottore
Companies
Help?
If
you
are
a
business
owner
faced
with
the
decision
of
receivership
or
liquidation, contact
us.
Dottore
court-appointed
receivers
have
helped
to
restructure
and
save
hundreds
of
companies
in
Northeast
Ohio
and
throughout
the
United
States.
With
our
expert
guidance
and
direction,
your
company
can
avoid
liquidation!