Partnership Deadlock - Court Appointed Receivers
Can a Receiver be appointed by the Court when there is a partnership dispute?
If you are a partner in a partnership and deadlock has been reached as a result of dispute with your partner(s) one option open to you is to apply to the Court for the appointmentment of what is known as a Court appointed Receiver. Quite often partnership disputes can result in an overall decision making impasse resulting in the underlying business having no direction. The dispute might be about the best way forward or how much each should draw or about myriad other matters.
Your solicitor would draft the Application to Court for the appoinment of a Court Appointed Receiver. The Court Application would set out the history of the matter, what attempts have been made to resolve the matter, the adverse consequences of the dispute and the objectives of the receivership. Your legal adviser would also seek to agree, if possible, the suggested terms of the Court Order with the solicitors acting for your partner(s).
It is important to decide what the objectives of the receivership would be when drafting the proposed Order that your solicitor will put to the Court. One reason for that is that Court Appointed Receivers have no inherent powers. The power given to a Court Receiver in a particular case derive from the wording of the Court Order of appointment. In other words if the power is not given in the Order then the Receiver does not have such an automatic power.
In other words there are no prescribed powers for a Court Appointed Receiver other than those detailed in the Court Order. Having said that the Court Appointed Receiver must follow the guidance in the Civil Procedure Rules ("CPR") concerning the filing of receipts and payments accounts with the Court and other matters. This is why the wording of the application to Court must be careful so as to give the Court Appointed Receiver enough power to achieve the objective of the receivership. If the Court appointed Receiver is initially given insufficient power to achieve the objective of the receivership he has to apply to Court (incurring more unnecessary cost) to extend his legal powers.
More often than not a Court Appointed Receiver will be appointed over a solvent Partnership which is in dispute - otherwise if the partnership was insolvent there are other available statutory insolvency procedures to address matters.
However threats by you through your solicitors to apply to Court for the appointment of a receiver may be too readily used because in the majority of cases a mediation to sort out the Partners' problems is likely to achieve a, financially, more appetising result - as the costs of the Receiver are completely avoided.
We nearly always recommend that the partners in dispute first consider applying for mediation. By sitting down under the guidance of an experienced mediator to try and settle the problem instead of applying for the appointment of a Receiver.
Even if a mediation has already been unsuccessful following appoinment we often bring the partners together to discuss the receivership and the related costs with a view to giving the partners a final chance to ettle their differences.
Please follow the links below to answer any questions you have about Court Appointed Receivers:
How does a Court Appointed Receiver get paid?
At Purnells we act for or have acted as Court Appointed Receivers to partnership firms of architects, estate agents, accountants, solicitors and other trading businesses.