A receivership is a court-appointed tool that can assist creditors in recovering funds in default and help troubled companies avoid bankruptcy. Having a receivership in place makes it easier for a lender to obtain the funds that are owed to them if a borrower defaults on a loan.

A receivership may also occur as a step in a company’s restructuring process that's initiated to return a company to profitability. It could arise as a result of a shareholder dispute over completing a project, liquidating assets, or selling a business.