Receivership in California Business Disputes: When a Court Will Appoint a Receiver Over a Company

Last updated: November 2026. Reviewed by Pavel Kolmogorov, California business litigation attorney (State Bar No. 321018).

A receiver is a neutral person appointed by a court to take control of property or a business while a lawsuit is pending. In a fight between co-owners, a California court may appoint one when the property or fund is in danger of being lost, removed, or materially injured, under Code of Civil Procedure section 564. Judges treat receivership as a drastic remedy and usually try narrower orders first. Kolmogorov Law, P.C. seeks and opposes receiverships in Orange County, Los Angeles, and across California.

Call (909) 235-6116 or contact us online to discuss a co-owner who is moving company assets, or a receivership motion filed against you.

What a receiver is and what one controls

The receiver is on nobody's side. He or she answers to the court, is sworn to perform the duties faithfully, and posts a bond in an amount the judge sets. (Code Civ. Proc., § 567.) A party, a party's lawyer, or anyone interested in the case cannot serve without the written consent of the parties. (Code Civ. Proc., § 566, subd. (a).)

Under the court's control, a receiver may take and keep possession of property, collect debts and rents, bring and defend lawsuits, make transfers, and do what the court otherwise authorizes. (Code Civ. Proc., § 568.) The order is everything. Some receivers only watch the bank accounts and approve payments. Others run the whole company and report to the judge.

The statutory grounds in a dispute between owners

Section 564 lists the cases. The one that fits most co-owner fights allows a receiver in an action between partners or others jointly owning or interested in any property or fund. The applicant must show a probable right or interest, and that the property or fund is in danger of being lost, removed, or materially injured. (Code Civ. Proc., § 564, subd. (b)(1).) A catch-all covers other cases where a receiver is necessary to preserve the property or rights of any party. (Code Civ. Proc., § 564, subd. (b)(9).)

Corporations have an added path. In an involuntary dissolution case, the court may appoint a receiver to manage the business if it has reasonable grounds to believe the corporation and its shareholders will otherwise suffer while the case is pending. (Corp. Code, § 1803.) Our page on involuntary dissolution covers that proceeding.

Why judges call it a drastic remedy

Trial courts have wide discretion here, and they use it carefully. The California Supreme Court has described receivership as a drastic remedy, especially where it may seriously injure the name and goodwill of a solvent going concern. Ordinarily, if a less severe remedy will adequately protect the parties, a court should not take property out of its owners' hands. (Golden State Glass Corp. v. Superior Court (1939) 13 Cal.2d 384, 393.)

That shapes the evidence. "My partner is stealing" will not carry the motion. Bank statements showing transfers to a new entity can. So can a missed payroll in a month when the partner in control was paid.

Narrower orders courts try first

An injunction is the usual first step. A judge can require two signatures on every check, bar transfers outside the ordinary course, or freeze a specific account, all without displacing management. Our page on TROs and preliminary injunctions explains the showing.

A deadlocked corporation has another option. Where an even-numbered board is equally divided and the business can no longer be conducted to advantage, the court may appoint a provisional director. Any director, or holders of at least one-third of the voting power, may ask. (Corp. Code, § 308, subd. (a).) The provisional director must be impartial and holds a director's powers until the deadlock is broken. (Corp. Code, § 308, subd. (c).) See our page on 50/50 deadlock.

Sometimes the real problem is information. An owner who cannot see the books may need an inspection order before anyone can say whether money is missing, as our page on members locked out of the records explains.

What a receivership costs and who pays

A receiver bills for time. So do the receiver's lawyers and accountants. Generally those costs are paid from the property in the receivership. The judge has broad discretion, though, to charge them to the party who asked for the receiver or to divide them among the parties. (Southern California Sunbelt Developers, Inc. v. Banyan Limited Partnership (2017) 8 Cal.App.5th 910, 922.) In a small company, the receivership can consume the money the owners are fighting over. I raise that with clients before any motion is drafted.

The indirect costs are harder to see. Lenders, landlords, and key customers learn that a court has taken control, and some loan agreements and leases treat the appointment as a default. An applicant who obtains a receiver without notice must also post an undertaking to cover the other side's damages if the appointment proves wrongful. (Code Civ. Proc., § 566, subd. (b).)

If your partner is draining the company

Document first, then move quickly. Download the bank records you can still reach. Preserve emails and accounting files. Then choose the order that fits: an injunction if the problem is a set of transactions, a receiver if the person in control cannot be trusted with any of it. Our page on a partner who steals from the company covers the claims that go with the motion.

If you are threatened with a receiver

Take the threat seriously. Do not concede the premise. The strongest opposition explains the challenged payments with documents, shows that the business is solvent and operating, and hands the judge a workable alternative: dual signatures, monthly reporting, or a stipulated injunction. An order appointing a receiver can be appealed right away. (Code Civ. Proc., § 904.1, subd. (a)(7).)

These motions are heard in the department assigned to the case. The procedure for applications and nominations is in California Rules of Court, rule 3.1175 and the rules that follow it. Our partnership dispute practice page and civil litigation practice page describe the larger case around the motion.

What to bring to the first meeting

The operating agreement, bylaws, or partnership agreement.
Bank statements and accounting reports for the last 12 months, or whatever you can still access.
The specific transfers or decisions you are worried about, with dates.
Loan agreements and leases, which may react to a receivership.
Any motion, demand letter, or court filing you have received.

Frequently asked questions

My 50 percent partner controls the bank accounts and is moving money out while we fight. Can a court appoint a receiver over the company?

Yes, if the evidence supports it. California Code of Civil Procedure section 564 allows a receiver in an action between partners or others jointly interested in property or a fund. The applicant must show a probable interest and a danger that the property will be lost, removed, or materially injured. Expect the judge to ask first whether an injunction over the accounts would be enough.

My business partner is threatening to have a receiver appointed over our company. How do I stop that from happening?

Give the judge a reason to choose something narrower. California courts are told not to take property from its owners where a less severe remedy will adequately protect the parties. Opposition papers that document the challenged transactions and offer safeguards, such as dual signatures, regular reporting, or a stipulated injunction, give the court grounds to deny the receivership.

Who pays for a receiver in California?

Usually the business does. In California a receiver's fees and expenses, including those of the receiver's attorneys, are generally paid from the property in the receivership. Courts have broad discretion to charge the cost to the party who sought the appointment, or to apportion it among the parties, for example when the property cannot cover it or the equities point that way.

What is the difference between a receiver and a provisional director?

A receiver takes possession of property or the business under Code of Civil Procedure section 564 and answers to the court. A provisional director, under California Corporations Code section 308, is an impartial person added to a deadlocked corporate board with a director's powers until the deadlock is broken. One casts a vote. The other takes the keys.

Can a receiver be appointed without notice to the other owner?

Only in an emergency. California permits an ex parte appointment, but the applicant must first post an undertaking, in an amount the court sets, to cover the defendant's damages if the appointment proves wrongful. The California Supreme Court has said an ex parte receiver over a business should be reserved for the greatest emergency, where irreparable injury would otherwise result.

Talk to a California business litigation attorney

If a co-owner is moving assets, or a receivership motion has been filed against your company, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. is located at 327 Magnet, Irvine, CA 92618, and represents business owners in Orange County, Los Angeles, and throughout California.

This page provides general information about California law and is not legal advice. Outcomes depend on the governing documents, the evidence, and the court.