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Missouri receivership law should not simply mimic the federal Bankruptcy Code. At least one Court of Appeals has suggested that the federal bankruptcy laws may preempt a state receivership statute that goes too far in creating a collective procedure to distribute assets to creditors. More important, however, bankruptcy cases frequently take too long and are too expensive, thereby delaying and reducing recoveries to creditors. By borrowing the best parts of the Bankruptcy Code, such as its clear claims processing and priority provisions, and avoiding some of its more litigious parts, such as preference recovery statutes, a new receivership statute will, in certain types of cases, permit a more efficient redeployment of distressed corporate assets to productive uses. There will always be instances where bankruptcy is preferable: such as a true corporate reorganization or to liquidate a large, complex business with assets in many states.
Lessons from other states
Several states have recently reformed their receivership statutes. Minnesota and Washington, for example, have completely overhauled their receivership statutes in recent years. These, and other states, have clarified a receiver’s duties and responsibilities without unduly limiting the flexibility that current law can provide. These new statutes were typically the result of several years’ work by the Debtor-Creditor and Real Estate sections of the local bars with the active input of turnaround professionals who frequently serve as receivers. The Missouri Bar Commercial Law Committee has already begun a systematic review of Missouri receivership law so that our antiquated laws can be revised to reflect modern commercial and legal realities.
David Warfield is the co-chair of Thompson Coburn’s Financial Restructuring Group. You can reach David at (314) 552-6079 or dwarfield@thompsoncoburn.com.