A client called me to ask how she could resolve a dispute with her business partner.  After 10 years of working together circumstances had changed.  They were no longer seeing eye-to-eye on business strategy and as 50-50 owners, their Company was in deadlock. They needed a separation.

While a traditional lawsuit seeking dissolution of the business was one option, this course of action might harm ownership value, takes a long time, and is expensive.

Exploring all available options led us to a discussion about Washington’s Receivership Laws, Chapter 7.60 RCW.  A Receivership is a judicial proceeding, much like a lawsuit, where the Court has the authority to appoint a neutral third-party to take control of a business during the legal dispute. That Court appointed neutral third-party is called a Receiver.

A Receiver is considered an officer of the Court, tasked with taking control of a business, property, or other assets.  The Receiver is granted authority at the time of appointment that will aid in the resolution of the dispute.

In considering whether to appoint a Receiver, the Court initially evaluates whether a Receiver is reasonably necessary and what other options may be available or adequate.  The moving party has the burden to present evidence showing that the business, or its revenue-producing potential, is in danger of being lost or materially injured or impaired.  The statute also expressly permits the appointment of a Receiver to aid in the dissolution of a company.

If an ownership dispute and deadlock are harming the operation of the business, a lawsuit may only make things worse.  In these deadlock situations, courts can be convinced that the damaging effect of the lawsuit alone is a sufficient basis for the appointment of a Receiver.  A Receiver can stabilize business operations while the parties attempt to resolve their dispute. Equally, if circumstances justify it and if it is requested, the Court can grant the Receiver the authority to market and sell the business.  This aids the dissolution process because it allows the business to maintain its value and be sold for fair market value, as opposed to a distressed sale.

The ownership dispute described above reflects just one example of how the appointment of a Receiver is worth exploring. Washington’s Receivership State provides over 40 different bases for the appointment of a Receiver appropriate in numerous and varied situations. We have successfully helped many clients resolve complex business disputes and complete business divorces in an efficient, cost-effective manner that maximizes the value of the asset utilizing Washington’s Receivership laws.  If you have any questions or would like more information on how a Receivership proceeding could help you, please feel free to contact me.