Receivership- Court appointed

[Tayla]

What is the name of your state (only U.S. law)?
Pennsylvania.


My employer has not been notified directly through the courts on a recent matter involving one of our clients. The Client (business account) is currently in litigation and the judge has appointed a receivership to an LLC to "manage" the assets/property for this client. The concern that affects our business is simple- Can we still actively pursue collecting on debts they've created thru our business relations or should we be halting any attempt til the courts make a final ruling? Our business president is chomping at the bits to get a new contract with this client, since the "LLC" is now in charge, yet its questionable if we are allowed to approach the LLC for signing for more debt that we may not be in the long term able to collect on. The information on the receivership appointment is legitimate as it was recorded in our newspaper and recorded in the courts.. Wouldn't the Newspaper public recording be the notice? Is a receivership the same as being assigned a trustee in bankruptcy? Is our business in jeopardy if we try to collect or create a new debt for this entity?

 

[BigMouthWino]

What is the name of your state (only U.S. law)?
Pennsylvania.


My employer has not been notified directly through the courts on a recent matter involving one of our clients. The Client (business account) is currently in litigation and the judge has appointed a receivership to an LLC to "manage" the assets/property for this client. The concern that affects our business is simple- Can we still actively pursue collecting on debts they've created thru our business relations or should we be halting any attempt til the courts make a final ruling? Our business president is chomping at the bits to get a new contract with this client, since the "LLC" is now in charge, yet its questionable if we are allowed to approach the LLC for signing for more debt that we may not be in the long term able to collect on. The information on the receivership appointment is legitimate as it was recorded in our newspaper and recorded in the courts.. Wouldn't the Newspaper public recording be the notice? Is a receivership the same as being assigned a trustee in bankruptcy? Is our business in jeopardy if we try to collect or create a new debt for this entity?

No a receivership is not a bankruptcy and does not create a "stay" against collecting debts owed by the entity while in receivership. The receiver is basically there to take the assets out of the hands of management and either preserve them for when whatever litigation they're involved with is concluded or to pay out to creditors.

While you're legally allowed to extend more credit to them and to collect on their existing debt are you sure this is a viable credit risk? Oftentimes receivers will decide the assets of the company are worth more sold than operating and liquidate the company. How about if your CEO wants to keep doing business with them he does it COD+?

 

[Tayla]

thank you for a clearer concept of the dynamics of this matter.
C.O.D is not an option. Prior to this litigation stage they were rated high risk thru creditors. My CEO is under the impression that with the "new" receiver in charge that the credit risk changes, why else would a judge assign them if they weren't worthy of good credit standing. Or so his reasoning goes.
Oddly its interesting to see how the courts can manage a business and keep it afloat....

 

[BigMouthWino]

thank you for a clearer concept of the dynamics of this matter.
C.O.D is not an option. Prior to this litigation stage they were rated high risk thru creditors. My CEO is under the impression that with the "new" receiver in charge that the credit risk changes, why else would a judge assign them if they weren't worthy of good credit standing. Or so his reasoning goes.
Oddly its interesting to see how the courts can manage a business and keep it afloat....

If anything the credit risk is higher dealing with a company under receivership. The receiver is set out to maximize the value of the business assets for whatever entity or judicial body appointed it. This may or may not include your company's interests. If the company cannot pay COD plus some of the past due credit balance for your future work perhaps it's time to prospect for new customers.

 

[OHRoadwarrior]

If your boss is hot on doing business with them and they want to do business also, he should negotiate an adjusted payment schedule whereby your company gets paid $3 in collectables, for every $1 in work done.

 

[BigMouthWino]

If your boss is hot on doing business with them and they want to do business also, he should negotiate an adjusted payment schedule whereby your company gets paid $3 in collectables, for every $1 in work done.

This is known in the credit industry as COD plus. Essentially they are paying COD for current services plus a portion of their credit balance every time work is completed, more inventory is delivered, etc.