Ohio’s Revised Receivership Statute- Effective March 23
Kegler Brown Creditors' Rights + Bankruptcy Alert January 29, 2015
Changes to Ohio's receivership statute will go into effect as of March 23, 2015. The changes include, among other things:
- Expansion of the circumstances under which a receiver may be appointed
- "Priority consideration" for the candidate proposed by the party seeking the appointment of a receiver
- Certain clarifications with respect to exercising the equity of redemption
The revised statute also expressly authorizes "free and clear" sales - perhaps the most anticipated change to Ohio's receivership statute.
Seeking approval of "free and clear" sales is not new to receivers, but the explicit authority to do so was not found in the current statute. The revised statute, however, expressly provides a receiver with the ability to sell property free and clear of liens through a private sale, a public or private auction, or by any other method the court determines to be fair. This change should serve to clarify differing interpretations of a receiver's ability to sell real property free and clear of liens. The revised statute also provides specific procedures for "free and clear" sales and considerations that the appointing court may take into account with respect to an application to sell property free and clear.
Under the revised statute, a court can appoint a receiver if the mortgagor has consented or there has been an assignment of rents and leases. Furthermore, a receiver can be appointed to manage the affairs of entities such as a partnership, a limited partnership or an LLC. The revised statute also provides that property sold by a receiver can be redeemed by paying the sale price or the total of all secured lien amounts, whichever is greater. Finally, under the revised statute, funds spent by a receiver will be treated as administrative costs of the action.
To a certain degree, the revised statute codifies existing practices. The changes should, however, provide additional structure and clarity to Ohio's receivership laws. If you would like more information about how these changes could affect you and your business, please contact Matt Salerno, a director in the Creditors' Rights and Bankruptcy practice area.