---
title: "What Is Receivership?"
term: "Receivership"
description: "Receivership is a court-appointed or contractually triggered process where a receiver takes control of a company's assets and operations to preserve value, pay creditors, or wind down the business — often a late-stage distress outcome for startups that exhaust financing options."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/receivership
---

# What Is Receivership?

> Receivership is a court-appointed or contractually triggered process where a receiver takes control of a company's assets and operations to preserve value, pay creditors, or wind down the business — often a late-stage distress outcome for startups that exhaust financing options.

**Receivership** places a company or its assets under an independent receiver's control to manage, sell, or liquidate property for the benefit of creditors and other claimants.

## How it works

Triggers include loan [/glossary/event-of-default](/glossary/event-of-default), covenant breaches, fraud, or insolvency filings. The receiver collects receivables, honors critical contracts, and may sell the business as a going concern or piecemeal. Venture equity sits low in priority unless secured; [/glossary/liquidation-preference](/glossary/liquidation-preference) only matters if proceeds exceed senior debt.

Some states allow receivership short of full bankruptcy; timelines and employee treatment vary. IP and customer contracts may transfer in asset sales — often the salvage path acquirers prefer.

## Why it matters

- **Founders:** Receivership usually ends founder control; personal guarantees on debt increase exposure.
- **Investors:** Distressed portfolios get marked to zero; recovery fights are legal, not operational.
- **Employees:** WARN obligations, final pay, and option value depend on sale outcomes and jurisdiction.

## Common mistake

Assuming preferred stock protects against secured lenders. A bank with a blanket lien can pull assets into receivership while equity watches from the sidelines.

## Related ideas

[/glossary/event-of-default](/glossary/event-of-default), bankruptcy, assignment for benefit of creditors, and wind-down.

## FAQ

### What is receivership in simple terms?

A neutral receiver — appointed by a court or under loan documents — runs or sells the company's assets to protect lenders and stakeholders when the business cannot manage itself or pay debts.

### Why does receivership matter?

Venture-backed startups with secured debt or asset-heavy models can face receivership instead of a orderly VC wind-down. Equity holders often recover little once senior claims are paid.


---
Source: https://venturecapitaltracker.com/glossary/receivership