What is a Receivership? | IRS Definition of a Receivership

A receivership is a third-party, appointed by a court, that helps creditors recover funds during a process such as a restructuring or a bankruptcy. The goal of receivership is to ensure that the company is able to successfully pay off as many of its debts as possible, and that the creditors are able to recover their assets in a fair way. Often, not all creditors and not all debts will be paid off, so part of the receivership’s job is to figure out the priority of payments.

Receivership is most commonly used during the process of bankruptcy, but that’s not always true. Bankruptcy doesn’t necessitate a receivership, and a receivership can happen during voluntary restructuring or during mergers and acquisitions as well. Receiverships are dissolved once the bankruptcy process or restructuring process is completed, and they are required to prioritize the well-being of the creditors and the company throughout the process. The receivership may be charged with ensuring that the company is profitable moving forward, which is where restructuring enters in.