A Chancery Court has the power to appoint a receiver in a minority oppression case. Generally, the Court may appoint one of three types of receivers: a provisional director, statutory receiver, or a custodial receiver. A provisional director is a person appointed by the Court to settle disputes or ties between shareholders when there is deadlock amongst them. Courts appear more willing to appoint provisional directors in minority oppression litigation where the corporation is deadlocked. Often the Court will appoint a provisional director who also serves as a mediator, who will assist the parties in trying to resolve their dispute.
Statutory receivers are appointed when the subject corporation is experiencing financial difficulties. Generally, a statutory receiver liquidates the assets of the corporation. The statutory receiver acquires legal title to the corporation assets and is empowered with dissolving or winding up the affairs of the corporation. Courts are generally reluctant to appoint a statutory receiver unless it is shown that the corporation is insolvent or its business is being run in a manner which greatly prejudices the corporation’s creditors.
Custodial receivers are appointed to manage the affairs of the corporation during the course of the litigation. Unlike the statutory receiver, they are not charged with winding up the affairs of the corporation. They do not take possession of the corporation’s assets. They are simply charged with running the company during the course of the litigation.