On May 10, 2016, the Missouri General Assembly passed the Missouri Commercial Receivership Act (MCRA), providing for significant changes to Missouri’s law on receiverships. Assuming that Governor Nixon signs the bill (which is almost certain), the law will become effective later this year. The significant changes to the Missouri receivership law in the MCRA are as follows:
- Provides clear standards for how and when a receiver in Missouri can be appointed and the grounds for appointment of a receiver;
- Establishes duties required of a receiver or that the court may require of a receiver so that the administration of a receivership estate will be conducted with transparency and consistency;
- Establishes clear powers that a receiver has or may be granted by a court, empowers a receiver to operate a business placed in receivership, permits a receiver to obtain financing for the continued operation of the business, and empowers the receiver to maintain the receivership property to maximize its value;
- Resolves the longstanding issue of whether a receiver has the power and authority to sell receivership estate assets;
- Authorizes a receiver to assume or reject contracts in order to preserve value of the receivership estate;
- Protects the rights of third-parties by requiring notice of the appointment of a receiver and provides a comprehensive procedure for submission of claims; and
- Provides for the distribution of assets to creditors under an established claim priority standard.
The changes in the law for complex commercial receiverships were needed because the previous receivership statute (Mo. Rev. Stat. § 515.240) provided little guidance to the courts or the parties. The MCRA (comprised of Mo. Rev. Stat. §§ 515.500 through 515.665) modernizes, clarifies, and expands the receivership statute to establish a standardized system for receivership administration in the State of Missouri. The new law will foster consistency in receivership court decisions and protect a receiver’s actions from collateral attacks.
The changes in the law and procedure are significant. The MCRA will make receivership a more robust remedy for parties dealing with financially distressed businesses and will introduce more predictability in Missouri receivership cases. Receivership in Missouri can now be carried out as a real alternative to bankruptcy in assisting to maintain a business and the value of a troubled business enterprise.
Webinar on the new law
On June 14, 2016, members of Thompson Coburn’s Financial Restructuring Practice presented a one-hour CLE webinar which will explain in detail the new processes and benefits of the Missouri Commercial Receivership Act. A recording of the webinar, "Seven Things You Should Know About the New Missouri Commercial Receivership Act," is now available.
Thompson Coburn's Financial Restructuring practice will continue to monitor developments in this area.