A Court Cannot Appoint a Receiver for a Corporation or LLC Without Proper Legal Notice

HNWBusiness Law

A recent case from the Appellate Division reminds us that the court rules which address business litigation must be closely followed.  A Trial Judge decision was reversed because he did not require the plaintiff to give notice of a proposed custodial receiver to the corporation, stockholder, and creditors of the corporation.

New Jersey Court Rule 4:53-1 reads as follows:

No order appointing a custodial receiver under  the general Equity power of the court shall be granted without the consent of or notice to the adverse party, unless it clearly appears from specific facts shown by affidavit or by the verified complaint that the immediate and irreparable damage will result to the applicant before notice can be served and a hearing had thereon.  Such an order granted without notice shall give the adverse party leave to move for the discharge of the receiver or not more than 2 days’ notice; and shall direct a corporation or a partnership for whom a custodial receiver has been appointed to show cause why a receiver should not be appointed under the power conferred by statute.  No statutory receiver shall be appointed for a corporation without giving it notice and an opportunity to be heard; and an order appointing a statutory receiver for a corporation shall give the stockholders and creditors of the corporation leave, at a specified time and place, to show cause why the receiver should not be continued.

The bottom line is to follow procedural due process.

To discuss your NJ Corporation or LLC matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.

By Fredrick P. Niemann, Esq. of Hanlon, Niemann & Wright, a Monmouth County, New Jersey Business, Corporation and LLC Attorney

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