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MICHIGAN’S NEW RECEIVERSHIP ACT
On October 15, 2020, Governor Whitmer signed into law the new Receivership Act, PA 210 of 2020 (the
“Act”). The Act is immediately effective. Notably, the Act expands existing receivership law, which
applied only to commercial real estate, such that it now applies to all commercial property.
The Act provides a state court process for selling or liquidating financially distressed businesses outside of
bankruptcy court. It grants broad, bankruptcy-like, powers to a receiver appointed under the Act, such as
the power to impose an automatic stay, the power to assign or reject contracts and leases, and the power to
sell assets free and clear of liens.
The following are some of the most important changes to existing receivership law effectuated by the Act:
The Act extends the provisions of the Uniform Commercial Real Estate Receivership Act, MCL
554.1101 et seq. to all commercial property, not just real property. Thus, it is now clear that the Act
is applicable to operating and liquidating businesses.
The Act harmonizes the process for appointing receivers with the Michigan Court Rules. The Act
creates a strong presumption in favor of the appointment of a receiver selected by the parties.
Additional noticing requirements are added to the Act regarding: (i) commencement of the
receivership and appointment of the receiver, (ii) expanding, modifying or limiting the powers of
the receiver, (iii) the sale of receivership property other than in the ordinary course of business, and
(iv) the process for filing claims. The Act also provides for increased reporting by the receiver
regarding the status of the receivership.
The Act does not expressly provide for the provision of “adequate protection” to parties, such as
secured creditors, whose collateral is used or sold by the receiver. Nevertheless, such parties will
want to closely monitor a receivership proceeding and, where appropriate, petition the court for such
Members of the Insolvency & Reorganization Group at Jaffe were involved in the drafting and negotiation
of the Act. Our team is comprised of professionals with decades of experience in dealing with troubled
companies. We have the expertise to address any issues that may arise during these challenging times.
Please feel free to reach out to us for more information
THE JAFFE INSOLVENCY & REORGANIZATION GROUP
Paul R. Hage (Practice Group Leader)
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