Business litigation can cost you the business

When business owners face litigation, it obviously causes concern. The first thought is usually “How much is this going to cost me?”

That is a very important question, but the stakes could be even higher than money. Some business owners must worry about losing their business entirely. Depending on the nature of the business litigation, you could lose your business before the trial has even begun for at least, the time until the litigation is settled.

Receiver is a four-letter word

Through the appointment of a receiver, a judge could take your business away from you. Essentially, if the judge believes that there is a danger of your business or its assets being lost, squandered or in some way, unreasonably squandered, they can appoint a receiver. The receiver can then legally transfer ownership of your business and its asset into their control, and then, they operate and care for the business.

Who is the receiver?

Usually, the receiver is appointed at the behest of the person or entity suing the business and its owner. If the judge agrees, they appoint the independent, third-party receiver. This person is a fiduciary and works at the behest and direction of the court. Both parties can offer potential receivers, and the judge can either select from those lists or select one on his own.

What kind of cases do I worry about?

Any case where your business assets are at issue, or where the litigation is over the ownership of the business, could likely see a request for a receiver. Nonetheless, if you are being sued by any federal agency, you are very likely to fight over receivership. This is because it is an open policy of many federal agencies to ask for receivership.

The takeaway

Business litigation is serious. Take it seriously. Though, you should be doing everything you can to avoid it in the first place. This can largely be done by having a Collin County attorney review contracts, employment policies and practices and possibly, do a business review to find problems and potential liabilities.