Receiverships: Texas

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STATE Q&A

byDeborah Williamson and Nicholas Zugaro, Dykema Gossett PLLC, with Practical Law Bankruptcy & Restructuring

Status: Maintained | Jurisdiction: Texas, United States

This document is published by Practical Law and can be found at: us.practicallaw.tr.com/w-032-9884

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Commencing a Receivership

1. What are the applicable statutes for

receiverships in your jurisdiction?

In Texas, the receivership statutes are relatively

comprehensive and provide rules for:

• General receiverships. A court of competent

jurisdiction may appoint a receiver:

– in an action by a vendor to vacate a fraudulent

purchase of property;

– in an action by a creditor to subject any property or

fund its claim;

– in an action between partners or others jointly owning

or interested in any property or fund;

– in an action by a mortgagee for the foreclosure of the

mortgage and sale of the mortgaged property;

– for a corporation that is insolvent, in imminent danger

of insolvency, has been dissolved, or has forfeited its

corporate rights;

– to rehabilitate a domestic or foreign entity (Tex. Bus.

Orgs. Code Ann.§§11.404 and 11.409);

– to liquidate a domestic or foreign entity (Tex. Bus.

Orgs. Code Ann.§§11.405 and 11.409);

– to preserve and protect marital property during a

divorce proceeding (Tex. Fam. Code Ann.§6.502);

– over the assets of a missing person (Tex. Civ. Prac. &

Rem. Code Ann.§64.001(d));

– to preserve mineral interest or leasehold interest

under a mineral lease owned by a nonresident or

absent defendant (Tex. Civ. Prac. & Rem. Code

Ann.§64.091);

– to sell property incapable of division (Tex. R. Civ. P. 770);

– over property in a municipality that is not in

compliance with certain life, health, and safety

ordinances (Tex. Loc. Gov’t Code Ann.§214.0031);

– over property of a nonproﬁt housing organization that

presents a life, health, or safety risk (Tex. Loc. Gov’t

Code Ann.§214.0031); or

– in any other case in which a receiver may be appointed

under the rules of equity (Tex. Civ. Prac. & Rem. Code

Ann.§64.001(6)).

• Turnover orders. A judgment creditor is entitled to

aid from a court of appropriate jurisdiction, including

a justice court, using an injunction or other means

to satisfy the judgment with the debtor’s property,

including the debtor’s present or future property

rights, provided that the property is not exempt

from attachment, execution, or seizure for satisfying

liabilities. The court may:

– order that the judgment debtor turn over nonexempt

property in its possession or subject its control,

together with all documents or records related to

the property, to a designated sheriff or constable for

execution;

– apply the property to satisfy the judgment; or

– appoint a receiver with the authority to take possession

of the nonexempt property, sell it, and pay the

proceeds to the judgment creditor to satisfy the

judgment.

(Tex. Civ. Prac. & Rem. Code Ann.§§31.002(a) to (h).)

A Q&A guide to receiverships in Texas. This Q&A addresses the process by which receiverships are

generally administered in Texas, including the commencement and administration of the receiverships,

the duties and actions of receivers, creditor claims, and the jurisdiction of the court. Answers to

questions can be compared across a number of jurisdictions (see Receiverships: State Q&A Tool).

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Receiverships: Texas

• Writ of sequestration. A writ of sequestration is

available to a plaintiff in a suit to:

– obtain title or possession of personal property

or ﬁxtures or for foreclosure or enforcement of a

mortgage, lien, or security interest on personal

property or ﬁxtures and a reasonable conclusion may

be drawn that there is immediate danger that the

defendant or the party in possession of the property is

likely to conceal, dispose, ill-treat, waste, destroy, or

remove the property from the county during the suit;

– obtain title or possession of real property or for

foreclosure or enforcement of a mortgage or lien

on real property and a reasonable conclusion may

be drawn that there is immediate danger that the

defendant or the party in possession of the property

is likely to use their possession to injure or ill-treat the

property or waste or convert the property’s timber,

rents, fruits, or revenue;

– obtain title or possession of property from which the

plaintiff was ejected by force or violence; or

– remove a cloud from the title of real property,

foreclose a lien on real property, or partition real

property where the plaintiff makes an oath that one

or more of the defendants is a nonresident of Texas.

A writ of sequestration may be issued when the suit is

initiated or at any time before ﬁnal judgment (Tex. Civ.

Prac. & Rem. Code Ann.§§62.001 to 62.002).

2. Please identify and describe the different

types of receiverships available in your

jurisdiction (for example, general receiver,

special receiver, regulatory receiver,

etc.) and their speciﬁc purposes. List any

common law receiverships available in your

jurisdiction.

In Texas, while not explicitly provided in the statutes,

courts may appoint:

• General receivers, which are given broad, generalized

powers over the debtor.

• Special or speciﬁc receivers, which are given powers

over a speciﬁc piece of property, for example, a bank’s

collateral.

• A receiver to rehabilitate or liquidate a business entity.

• A receiver as a remedy for an actual or suspected breach

of trust (Tex. Prop. Code§114.008(5)).

(See Question 1.)

3. Generally, in which court must a

receivership be commenced? Please

explain for each type of receiver.

In Texas, a court of competent jurisdiction generally

has authority to appoint all types of receivers. However,

there are different levels of courts in Texas with varying

jurisdictional limits. For example:

• Constitutional county court. Each county has a

constitutional county court with original jurisdiction

over suits where the amount in controversy is between

$200 and $10,000. While these courts may appoint

receivers, the $10,000 jurisdictional limit makes

these appointments impractical. However, not all

constitutional county courts exercise judicial functions.

In large counties, the county judge instead typically

devotes their full attention to administering the county

government as its chief executive.

• County courts at law. Certain counties have county

courts at law in addition to constitutional county courts.

County courts at law have jurisdiction over civil matters

where the amount in controversy is between $200 and

$200,000.

• Probate courts. Probate courts have authority over

probate estates and may appoint receivers if the subject

matter of the receivership is within the bounds of the

court’s authority (Tex. Estates Code§32.001). In a

county with a statutory probate court, the probate court

has exclusive jurisdiction of all probate proceedings.

There are 18 probate courts in Texas. In counties with

a county court at law but no probate court, the county

court at law hears probate matters. In counties without

a probate court or county court at law, contested

probate matters may be heard by an assigned statutory

probate court judge or the district court.

• Judicial district courts. In Texas, these courts are referred

to as general jurisdiction courts and have competent

jurisdiction to appoint receivers for any matter where

the amount in controversy exceeds $500. There is no

maximum limit to the amount in controversy that a district

court may adjudicate. District courts also have original

jurisdiction over divorce cases, juvenile cases, and cases

involving title to land. District courts have concurrent

jurisdiction with county courts, which means that a matter

may properly be brought in a county court or a district

court. In practice, district courts are most likely to be the

court of competent jurisdiction appointing a receiver.

In a receivership involving real property, the receivership

must be commenced in a court of competent jurisdiction

in the county where the real property is located.

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Receiverships: Texas

Appeals from county courts and district courts are made

directly to the Texas Courts of Appeal. Civil appeals from

the Texas Courts of Appeal are made to the Supreme

Court of Texas.

4. Please identify who has the authority

to seek appointment of a receiver in your

jurisdiction.

In Texas, a party with a probable interest or a right

to the property has standing to seek appointment of

a receiver over that property (Tex. Civ. Prac. & Rem.

Code§62.001(b)). However, a petition seeking to appoint

a receiver for a corporation, partnership, or individual may

not be brought by that same corporation, partnership, or

individual (Tex. Civ. Prac. & Rem. Code§64.002(A)).

When determining whether the petitioning party has

a right to appoint a receiver, courts evaluate whether

the petitioner has a meritorious claim on the property,

which may be established at a trial on the merits (see

Texas Consolidated Oilsv.Hartwell, 240 S.W.2d 324,

327 (Tex. Civ. App. 1951)). A probable interest exists

by statute in actions between partners and in actions

between joint owners of property (Tex. Civ. Prac. & Rem.

Code§64.001(a)(3)).

5. What circumstances must exist

for a receiver to be appointed in your

jurisdiction? Please address whether the

company must be insolvent and what

insolvency means in your jurisdiction.

Under Texas law, a receiver may be appointed at any

time to protect and preserve property or funds that are in

danger of being lost, removed, or materially injured (Tex.

Civ. Prac. & Rem. Code§§64.001(b) and (c)).

In a foreclosure or other mortgage enforcement

proceeding, the court may appoint a receiver for the

mortgaged property if:

• It appears that the mortgaged property is in danger of

being lost, removed, or materially injured.

• The condition of the mortgage has not been performed

and the property is insufﬁcient to discharge the

mortgage debt.

• The property owner expressly agreed in the deed of

trust to appointment of a receiver in the event of a

default (see Riverside Props.v.Teachers Ins. & Annuity

Ass’n of Am., 590 S.W.2d 736, 738 (Tex. Civ. App. 1979)).

Insolvency is not a statutory requirement to appoint a

receiver in Texas. A court of competent jurisdiction may

appoint a receiver for a corporation that:

• Is insolvent.

• Is in imminent danger of insolvency.

• Is dissolved.

• Forfeited its corporate rights.

(Tex. Civ. Prac. & Rem. Code§64.001(a)(5).)

Receivers are also typically appointed:

• At the request of a secured lender with a lien on real

or personal property. The lender must only show that

the property needs protection. While not required,

a showing of waste, loss, fraud, or impairment

strengthens the request for a receiver.

• In a business dispute between two or more partners

or equity holders. In that case, a court of competent

jurisdiction may choose to appoint a rehabilitative

receiver to conserve the entity’s business assets

avoid damages to parties at interest (Tex. Bus. Orgs.

Code§11.402). A rehabilitative receiver is appropriate

when a company cannot function because:

– the entity is insolvent or in imminent danger of

insolvency (including unable to pay its debts as

they come due);

– the entity’s governing persons are deadlocked in

managing the affairs, causing or threatening an

irreparable injury to the entity;

– management is carrying out the entity’s affairs in

illegal, oppressive, or fraudulent methods; or

– the entity’s property is being misapplied or wasted.

• In a for-proﬁt corporation, the voting shareholders

are deadlocked and have failed for at least two years

to elect successors to governing persons the terms

of which have expired or were set to expire on the

election and qualiﬁcation of successors (Tex. Bus. Orgs.

Code§11.404(1)(e)).

Texas district courts may order the liquidation of assets of

a business entity in only if:

• The circumstances require liquidation to avoid damage

to interested persons.

• There is compliance with all other requirements of the law.

• All other remedies at law, including appointing a

rehabilitative receiver, are inadequate.

(Tex. Bus. Orgs. Code§11.405(b).)

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Receiverships: Texas

Provided the circumstances under Tex. Bus. Orgs.

Code§11.405(a) exist, a court with jurisdiction over the

property or business of a domestic entity may appoint a

liquidating receiver:

• When the Texas attorney general ﬁles an action to

dissolve the entity and the court determines that

liquidation of the entity’s business should precede entry

of a decree of dissolution.

• On an entity’s application to have its liquidation

continued under court supervision.

• If after 12 months of being in receivership, the court

does not ﬁnd that a feasible plan or remedy has been

presented for the property or entity in receivership.

• On application of a claimant, if irreparable damage is

likely to be caused to the unsecured creditors of the

entity unless there is an immediate liquidation.

• For a nonproﬁt or cooperative business, on application

of a member or director if the entity is no longer able to

carry out its purposes.

(Tex. Bus. Orgs. Code§11.405(a).)

A receiver typically cannot be appointed without notice

and hearing. However, in exceptional and extreme

circumstances, a court may appoint a receiver on an ex

parte basis (Krumnowv.Krumnow, 174 S.W.3d 820, 828-

29 (Tex. App. 2005) (citing Solomonv.Matthews, 238 S.W.

307 (Tex. Civ. App. 1922))).

6. What is required to ﬁle a receivership

in your jurisdiction? Please include

information on:

• Documents, including any ofﬁcial forms and a

description of the operative document.

• Filing requirements (including what needs to be ﬁled

and where, timing, electronic versus paper, and any

fees that must be ﬁled).

Documents

Texas does not have ofﬁcial forms speciﬁc to appointing a

receiver. The party seeking appointment of a receiver must

ﬁle a petition to commence a cause of action describing

one of the causes of action in a manner sufﬁcient to support

appointment of a receiver. Receivership is typically an

ancillary proceeding that is a subpart part of a civil matter.

Corporate actions or approval are not required for seeking

appointment of a receiver.

When seeking to appoint a receiver, the party making the

request must ﬁle:

• A petition and application for the appointment of a

receiver. The burden of proof is on the plaintiff to show

the existence of circumstances justifying appointment

of a receiver. The court may receive a veriﬁed petition

and oral testimony as evidence (see Fergusonv.First

Nat’l Bank, 218 S.W.2d 1019, 1020 (Tex. Civ. App. 1949)).

• A bond in an amount speciﬁed by the court. The amount

of the applicant’s bond should be sufﬁcient to cover all

probable damages and costs (Tex. R. Civ. P. 695a). The

applicant’s bond is separate from the required receiver’s

bond and, like the receiver’s bond, may be substantial

depending on the facts of the case.

• A proposed receivership order.

A typical ﬁling fee must also accompany the petition.

In certain limited circumstances, a receiver may be

appointed on an ex parte basis.

A veriﬁed petition to appoint a receiver is sufﬁcient to

support a receivership without further evidence unless

an adverse party counters the petition by ﬁling a veriﬁed

answer. An adverse party that ﬁles an answer to the

petition should include sworn testimony refuting the need

for a receivership. Filing a sworn answer shifts the burden

of proof to the plaintiff to establish the allegations of the

petition by a preponderance of the evidence.

After all documents are ﬁled with the court, the court

must hold a hearing on the petition for receivership.

Notice

If the application for receivership relates to property that

is ﬁxed and immovable, the court must schedule a hearing

and serve notice on the adverse party at least three days

before the hearing (Tex. R. Civ. P. 695). Failure to give

notice makes the appointment of the receiver erroneous

but not void (Johnsonv.Barnwell Prod. Co., 391 S.W.2d

776, 785 (Tex. Civ. App. 1965)).

However, in extraordinary circumstances, a court may

appoint a receiver on an ex parte basis. When seeking

an ex parte appointment, the petitioning plaintiff must

clearly allege facts evidencing that the plaintiff is likely

to suffer a material injury by a delay of providing notice

(Morrisv.N. Fort Worth State Bank, 300 S.W.2d 314, 315

(Tex. Civ. App. 1957)).

Examples of when a court may appoint an ex parte

receiver, include:

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Receiverships: Texas

• When the defendant is beyond the jurisdiction of the

court.

• When the defendant’s whereabouts are unknown.

• When notice jeopardizes delivery of the property.

• Facts that credibly suggest that removal of property

from the jurisdiction of the court is imminent.

• When property is perishable.

In practice, the courts exercise extreme caution before

appointing a receiver ex parte.

Selecting a Receiver

7. Please explain how a receiver is selected

in your jurisdiction and whether there are

any statutory requirements or qualiﬁcations

to be appointed as receiver.

In Texas, the general receivership statutes require that a

receiver must:

• Be a US citizen and a qualiﬁed voter in Texas at the time

of appointment.

• Maintain actual residence in Texas during the

receivership

(Tex. Civ. Prac. & Rem. Code§§64.021(a)(1) and (c).)

The receiver may not be:

• A party interested in the action.

• An attorney for a party.

• A person interested in the action.

(Tex. Civ. Prac. & Rem. Code§64.021(a)(1).)

A receiver for a business or assets of a business must:

• Be a citizen of the US or an entity authorized to act as a

receiver (Tex. Bus. Orgs. Code§11.406(a).)

• If a foreign entity, be registered to transact business in

Texas (Tex. Bus. Orgs. Code§11.406(b).)

The proposed receiver must execute an oath to faithfully

discharge its duties and follow the court’s orders (Tex. Civ.

Prac. & Rem. Code§64.022; see Duties and Actions of

the Receiver).

8. Please explain what is required to obtain

court approval of a selected receiver in your

jurisdiction.

In Texas, the party seeking appointment of a receiver

typically selects and recommends a receiver as it deems

appropriate. However, any party in the actions may make

a nomination. The requesting party often attaches the

receiver’s qualiﬁcations to the veriﬁed petition.

Before assuming the duties as receiver, the receiver must

post a bond and sign an oath of receiver. The amount of

the bond must be:

• Included in the receiver’s order of appointment.

• Conditioned on the receiver faithfully discharging its

duties and obeying the court’s orders.

(Tex. Civ. Prac. & Rem. Code§§64.022 and 64.023.)

After the court approves the bond and the receiver

makes the oath, the applicant must also ﬁle a bond

that is approved by the clerk, payable to the defendant

in the amount speciﬁed by the court. The amount of

the applicant’s bond should be sufﬁcient to cover all

probable damages and costs (Tex. R. Civ. P. 695a; see

Question 11).

Qualiﬁcation Criteria

In determining whether a proposed receiver is qualiﬁed

to serve as receiver and as an ofﬁcer of the court, the

discretion lies with the court.

The proposed receiver must execute an oath to faithfully

discharge the receiver’s duties and follow the court’s

orders (Tex. Civ. Prac. & Rem. Code§64.022).

Duties and Actions of the Receiver

9. Please identify and describe the main

statutory duties and responsibilities for

each type of receiver, as applicable, in your

jurisdiction (for example, providing notice to

creditors, holding meetings of creditors, etc.).

In Texas, the receiver must execute an oath to faithfully

discharge its duties and follow the court’s orders (Tex. Civ.

Prac. & Rem. Code§64.022). The general powers and

duties of a receiver include:

• Taking charge and keeping possession of the property.

• Collecting and receiving rents.

• Collecting and compromising demands.

• Making transfers.

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Receiverships: Texas

• Performing other acts regarding the property as

authorized by the court in the order appointment

thereceiver.

(Tex. Civ. Prac. & Rem. Code§64.031.)

The court may also direct a receiver to continue operation

of a business.

In certain circumstances, the court may appoint a

receiver to:

• Rehabilitate a domestic entity.

• Liquidate a domestic entity.

(Tex. Bus. Orgs. Code§§11.404 and 11.405.)

After appointment, a receiver must provide the appointing

court with an inventory of the property it received (Tex. Civ.

Prac. & Rem. Code§64.032). If a person in possession

of receivership property fails to turn property over to the

receiver, the receiver typically brings an action against the

party in possession of the property, including a trespass to

try title or forcible detainer action.

Subject to orders of the appointing court, the receiver may

sell receivership property. However, the receiver may only

sell interests in property that the owner had at the time of

appointment. A sale of receivership assets is not ﬁnal until

conﬁrmation by the court.

The receiver is entitled to compensation for their

services and for attorney’s fees, paid from the proceeds

of receivership property. The receiver’s fee and other

administrative expenses are paid from funds on hand in

the receivership and then against receivership property or

the proceeds from the sale of property (Tex. Civ. Prac. &

Rem. Code§64.051).

10. In addition to statutory duties, please

summarize any common law duties

imposed on a receiver in your jurisdiction.

There are no common law duties imposed on a receiver

in Texas. Receiverships in Texas are instead ﬂexible and

the order appointing the receiver may specify additional

powers and duties of the receiver.

11. Please explain if the receiver must post

a bond in your jurisdiction and take any

actions before beginning its duties.

In Texas, before assuming the duties as receiver, the

receiver must post a bond and sign an oath of receiver.

The amount of the bond must be:

• Included in the receiver’s order of appointment.

• Conditioned on the receiver faithfully discharging its

duties and obeying the court’s orders.

(Tex. Civ. Prac. & Rem. Code§§64.022 and 64.023.)

After the court approves the bond and the receiver

makes the oath, the applicant must also ﬁle a bond that

is approved by the clerk, payable to the defendant in

the amount speciﬁed by the court. The amount of the

applicant’s bond should be sufﬁcient to cover all probable

damages and costs. Filing a receiver’s bond does not

satisfy the requirement to ﬁle an applicant’s bond (Tex. R.

Civ. P. 695a).

A receiver for a business entity is also required to give a

bond in the amount ﬁxed by the court (Tex. Bus. Orgs.

Code§11.406(a)(2)).

12. Under what circumstances can a receiver

be removed in your jurisdiction?

In Texas, a receiver is an ofﬁcer and extension of the

appointing court and acts under the direction and

supervision of the court. If a receiver acts without

authority it may assume the risk of liability for incurred

costs and expenses.

A court may alter its order appointing a receiver and

terminate an appointed receiver. Termination of an

order appointing a receiver is appropriate, for example,

immediately after the condition that necessitated

appointment of the receiver is remedied (Ritchiev.Rupe,

443 S.W.3d 856, 867 (Tex. 2014)). After termination of

a receiver, the court may determine, in its discretion, to

delay the receivership process until appointment of a new

receiver over the receivership property.

13. Please explain the process for

terminating or removing a receiver,

including all relevant notice requirements.

In Texas, termination or discharge of a receiver may be

made on the motion of a party in interest at any time.

A motion to terminate a receivership is appropriate when:

• There is no longer a present need for the receivership to

exist.

• A change in circumstances alleviates the need for the

receivership to continue.

There is no statutory provision detailing the process for

terminating or removing a receiver. The duration of a

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receivership and its termination are within the sound

discretion of the trial court (Gilesv.Yarborough, 224 S.W.2d

720, 22 (Tex. Civ. App. 1949)). When seeking removal,

the moving party typically should provide notice to

other interested parties of the application for removal or

discharge of a receiver. However, a receiver remains in place

until the appointing court orders the receiver’s dismissal.

After granting a motion to terminate, the receiver must

return receivership property to persons entitled to that

property. If necessary, the court may delay termination until

it qualiﬁes the persons entitled to receive the property.

A receivership may also terminate when the court’s

authority to continue the receivership ends. For example,

a receivership over a corporation is typically limited to

three years and cannot be extended for more than eight

years (Tex. Civ. Prac. & Rem. Code§64.072(a) and (d)).

Administration of the Receivership

14. What are the key processes during the

receivership in your jurisdiction? Please

describe:

• Financing, including the ability of the receiver to

obtain ﬁnancing.

• Assets sales, including whether sales are held at

private or public auction and the circumstances for

each, as well as notice requirements.

• Avoidance powers, including the speciﬁc avoidance

powers given to a receiver in your jurisdiction and the

relevant time period for recovering preferences.

• Assumption or rejection of executory contracts,

including what actions a receiver must take to

assume or reject a contract in your jurisdiction.

In Texas, there are no speciﬁc statutory requirements for

sales, avoidance powers, or the assumption and rejection

of executory contracts. If the receiver requires this type of

relief, the receiver or other party seeking the relief typically

ﬁles a motion requesting the court approve the relief.

The general powers and duties of a receiver of a Texas

receivership include:

• Taking charge and keeping possession of receivership

property.

• Collecting and receiving rents.

• Collecting and compromising demands.

• Making transfers.

• Performing other acts regarding the property as

authorized by the court in the order appointment the

receiver.

(Tex. Civ. Prac. & Rem. Code§64.031.)

The court may also direct a receiver to continue operation

of a business.

After appointment, a receiver must also provide the

appointing court with an inventory of the property it

received (Tex. Civ. Prac. & Rem. Code§64.032).

Use, Sale, or Transfer of Property

In Texas, there is no statute speciﬁcally stating that a

receiver may sell assets. However, a sale in a general

receivership:

• May be conducted in private or at a public auction.

• Requires oversight from the court and is not ﬁnal until

the court approves the sale (see Baumgartenv.Frost,

143 Tex. 533, 186 S.W.2d 982, 986 (1945)).

The court controls the receivership and therefore has the

authority to prescribe the terms and conditions of any

sale of property, including any required notice. The court

has wide discretion in making these determinations and

the receiver must obey the terms set by court order when

selling the assets.

The process for selling receivership assets from beginning

to end is typically as follows:

• The receiver or a party to the receivership ﬁles a motion

for an order to sell property.

• The court issues an order approving the sale of property

(without hearing if the sale is uncontested). In cases

where there is only one bidder, the party conducting the

sale may make a representation to the court seeking

approval of the sale. If there is more than one buyer,

the party conducting the sale typically proposes a

procedure for the sale to be approved.

• The receiver markets the property and collects bids from

potential purchasers.

• The receiver reports its marketing efforts to the court

and may accept the highest offer without notice to

parties or court approval. The receiver is not obligated

to entertain late bids.

• The receiver provides notice of the sale to all parties and

requests that the court hold a hearing.

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• The court holds a hearing on the terms of the proposed

sale. Parties may appear and object to the proposed

sale at the hearing.

• The court approves the sale and:

– resolves or overrules any objections;

– conﬁrms that the sale complied with the original sale

order;

– orders that the property is conveyed to the purchaser

and the proceeds of the sale are distributed;

– hears any claims to the proceeds of the sale

• Sale proceeds are distributed after payment of

customary and reasonable expenses and fees related to

the sale (see Question 17).

Avoidance Powers

There is no statute in Texas providing that a receiver

may exercise any avoidance powers in a receivership.

The receiver’s ability to exercise any avoidance powers,

including pursuing preferences or fraudulent conveyances,

typically is governed by the order appointing the receiver

or another related order entered by the court. Receivers

also often have the authority to ﬁle suit to avoid and

recover fraudulent transfers under the Texas Uniform

Fraudulent Transfer Act (Tex. Bus. & Comm. Code§24).

Rejection or Assumption of Unexpired

Leases or Executory Contracts

There is no statute in Texas providing that a receiver

may assume or reject a debtor’s executory contracts or

leases. The receiver’s ability to assume or reject executory

contracts typically is governed by the order appointing the

receiver or another related order entered by the court.

Creditor Claims

15. What is the procedure for notifying

creditors of their rights to ﬁle claims

in your jurisdiction? Please explain all

notice requirements, including proof of

claim requirements and deadlines. List all

applicable statutes.

Notice

In Texas, there are no statutory requirements setting out

the procedure for notifying creditors of their rights to ﬁle

claims and the deadline for ﬁling claims. The procedure is

instead ﬂexible, depends on each case, and is established

by the court.

The receiver or party that obtained the receiver’s

appointment typically provides actual notice of the

receivership to interested parties by delivering or mailing

a copy of the receivership order. If special circumstances

exist, the receiver should seek court approval of its

contemplated notice procedures

Claims Process

In Texas, there are no statutory schemes for determining the

validity and priority of claims in an equitable receivership.

Claims may be submitted directly to the receiver or ﬁled

with the court. The receiver has broad discretion regarding

treatment of claims. The receiver may:

• Object to claims in their entirety.

• Dispute the amount or asserted priority of claims.

• Determine not to raise any objection to a claim.

Texas statutes do provide a priority scheme for application

of receivership funds. The receiver must apply the

earnings from receivership property to pay claims in the

following priority:

• The court costs of the proceeding or action.

• All employee wages.

• Any debts owed for materials and supplies purchased

by the receiver for improving the receivership property.

• Any debts owed for improvements to the property made

during the receivership.

• All claims and accounts against the receiver for:

– contracts made by the receiver;

– personal injury claims;

– livestock claims accruing during the receivership; and

– judgments rendered against the receiver for personal

injuries and for livestock killed.

• Judgments recovered in suits brought before

appointment of the receiver.

(Tex. Civ. Prac. & Rem. Code§64.051; see Question 17.)

Texas receivership law does not discuss governmental

and taxation claims. However, in practice, tax claims are

generally given priority over other creditor claims (see

Finger Contract Supply Co.v.Republic Nat’l Bank, 412

S.W.2d 79, 83 (Tex. Civ. App. 1967)).

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Receiverships: Texas

16. Please explain the process for determining

allowance and disallowance of claims in

your jurisdiction, including the power and

authority of the court regarding the process.

The Texas Statutes do not contain any statutory

requirements or procedure for allowing or disallowing

claims in a receivership. The receiver typically determines

whether a claim should be allowed or disallowed and

seeks approval from the court.

17. Please explain the priority scheme for

the payment of creditors’ claims in your

jurisdiction and the applicable statutes.

The Texas statutes provide for payment of costs and

claims in the following priority:

• The court costs of the proceeding or action.

• All employee wages.

• Any debts owed for materials and supplies purchased

by the receiver for improving the receivership property.

• Any debts owed for improvements to the property made

during the receivership.

• All claims and accounts against the receiver for:

– contracts made by the receiver;

– personal injury claims;

– livestock claims accruing during the receivership; and

– judgments rendered against the receiver for personal

injuries and for livestock killed.

• Judgments recovered in suits brought before

appointment of the receiver.

(See Tex. Civ. Prac. & Rem. Code§64.051.)

Compensation of Receiver and

Professionals

18. Please explain how receivers are

compensated in your jurisdiction, including:

• Whether there is a statutory or state law threshold

compensation fee for receiver.

• Whether court approval is required for

compensation.

• Whether parties must receive notice.

In Texas, the costs of administering the receivership

include the fees and expenses the receiver incurs after

entry of the appointment order. A receiver’s fees and

expenses may include:

• Operating costs.

• Preservation costs.

• Contracts or obligations undertaken by the receiver.

• Personal expenses, where appropriate.

A receiver may present an interim fee application. The

receiver should also ﬁle a ﬁnal fee application with

supporting evidence of the reasonable and customary

nature of the fees owed (see Hillv.Hill, 460 S.W.3d 751,

756 (Tex. App. 2015)).

Compensation of the receiver’s fees and its professionals

comes from the proceeds of receivership property. The

amount of the receiver’s fee is determined by the value

of services rendered (Bergeronv.Sessions, 561 S.W.2d

551, 553 (Tex. Civ. App. 1977)). For example, the following

factors are considered:

• The nature, extent, and value of the receivership estate.

• The complexity and difﬁculty of the work.

• The time spent.

• The knowledge, experience, skill, and labor required

from the receiver

• The diligence and completeness of the tasks performed.

• The results achieved.

(See Bergeron, 561 S.W.2d at 554-55.)

The court must approve the receiver’s compensation and

cannot fully award the fees until the receiver submits

a ﬁnal accounting and is discharged from its duties

(Hodgesv.Peden, 634 S.W.2d 8, 10 (Tex. Civ. App. 1982)

(citing Bergeron, 561 S.W.2d at 553 (Tex. Civ. App. 1977))).

In Texas receiverships, “a court should cautiously avoid

excessive or improper fee allowances …[s]ufﬁcient fees

should be allowed to induce competent persons to serve

as receiver, attorney or accountant; however, receiverships

should also be administered as economically as possible,

and fees for services performed by these court ofﬁcers

should be moderate rather than generous” (Bergeron, 561

S.W.2d at 555).

In some instances, the receiver may also serve as their

own attorney. In that instance, the receiver acting as

the receiver’s own attorney must segregate the value of

their skills as a receiver and the value of their services as

attorney for the receiver (see Hodges, 634 S.W.2d at 11).

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Texas law does not address whether parties must receive

notice of the terms and payment of compensation.

19. What professionals are receivers

permitted to retain in your jurisdiction?

Please explain how a receiver’s

professionals are compensated.

The Texas statutes do not explicitly provide for the

retention of professionals by a receiver. However, the

order appointing the receiver typically authorizes receivers

to retain professionals and contains the procedures

regarding compensation of those professionals. The

professionals are then hired without further court

approval.

Closing the Receivership

20. What is the process for closing a

receivership proceeding in your jurisdiction?

Where a court order is required, please

explain the key provisions of an order

closing the case.

In Texas, when the receiver completes administration

of the receivership estate or its duties regarding the

receivership, the receiver or the party that sought the

appointment of the receiver must ﬁle a motion with the

court requesting termination of the receivership and

discharging the receiver.

An orderly termination and discharge of a receiver

includes:

• A ﬁnal accounting of the receivership estate prepared

by the receiver and submitted to the court.

• A determination of the receiver’s fees and an order

directing payment of the fees.

• Restoring any remaining receivership property to the

owner of the property.

• Entry of an order discharging the receiver.

21. Is there a process in your jurisdiction for

dissolving the receive company after the

receivership concludes?

In Texas, there is a limited statutory process for dissolving

a debtor entity after the receivership concludes. At the

conclusion of the receivership, typically:

• The attorney general may choose to ﬁle an action to

dissolve the entity. When this occurs, the court may also

determine to appoint a liquidating receiver. In other

circumstances, Texas law permits appointment of a

liquidating receiver to liquidate an entity’s assets but

does not speciﬁcally provide for dissolution of the entity

in receivership (Tex. Bus. Orgs. Code§11.405)

• The debtor’s ofﬁcers or directors may ﬁle articles of

dissolution with the Texas Secretary of State in the

ordinary course.

Jurisdiction and Power of the Court

22. What statutes, if any, confer powers

on the court relating to the receivership,

receiver, and creditors in your jurisdiction?

Please explain those powers.

The Texas statutes provides that a court has the power

to appoint a general receiver (Tex. Civ. Prac. & Rem.

Code§64.001). Pending any hearing on a receiver’s

appointment, the court may restrain an adverse party

from removing, secreting, or disposing of the property.

After appointing a receiver, the court:

• Has exclusive jurisdiction over the assets placed in

receivership.

• Determines the rights of the parties in the debtor’s

assets the distribution of the proceeds.

The court’s procedures regarding a general receivership

are detailed Tex. Civ. Prac. & Rem. Code§64 and

supplemented by the Texas Rules of Civil Procedure.

The court

(See Question 3 and Question 5.)

23. What responsibilities does the clerk of

court in your jurisdiction have in relation to

maintaining the records of the receivership?

In Texas, an applicant seeking the appointment of a

receiver must post a bond with the clerk of court in an

amount determined by the court (Tex. R. Civ. P. 695a). The

appointed receiver must also post a bond with the clerk

in an amount determined by the court conditioned on

receiver faithfully discharging its duties and following the

court’s orders (Tex. Civ. Prac. & Rem. Code§64.022; see

Question 11).

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Bankruptcy Considerations

24. May a receiver commence a bankruptcy

proceeding in your jurisdiction?

In Texas, there is no statutory prohibition on a receiver’s

ability to ﬁle a bankruptcy case. However, a receiver’s

ability to ﬁle a bankruptcy case is directly derived from the

order of appointment. If the order of appointment does

not speciﬁcally grant the receiver the authority to ﬁle a

bankruptcy proceeding, it therefore is possible that the

receiver cannot take that action.

If an entity or an individual in receivership ﬁles for

bankruptcy, the receivership does not terminate but the

rights and powers of the receiver may be affected by

the bankruptcy and the bankruptcy court’s jurisdiction

(§§362, 542, 543, Bankruptcy Code).

25. If an involuntary petition is ﬁled during

the course of the receivership in your

jurisdiction, what action, if any, must the

receiver take?

An involuntary bankruptcy case generally may be ﬁled by

one or more creditors holding at least $16,750 in non-

contingent claims that are not subject to a bona ﬁde

dispute if the petitioning creditors either:

• File their petition within 120 days after the receiver is

appointed.

• Can show that the debtor generally is not paying its

debts as they come due.

(§303(b)(1), (2), Bankruptcy Code; see Practice Note, The

Involuntary Bankruptcy Process.)

An order appointing a receiver does not operate as a

stay to the commencement of a bankruptcy case under

federal bankruptcy laws. When an involuntary petition

is ﬁled after a receiver has been appointed under Texas

law, the debtor’s property becomes the jurisdiction of

the bankruptcy court and the receiver is considered a

custodian (§543, Bankruptcy Code). At that time:

• The receiver must preserve and protect the assets of the

receivership estate (§543(a), Bankruptcy Code).

• Unless otherwise ordered by the bankruptcy court, the

receiver must turn over property of the receivership estate

to the bankruptcy trustee (§543(b), Bankruptcy Code).

• The bankruptcy court may permit the receiver to continue

to administer the debtor’s assets if appointed or in

possession of the assets more than 120 days before the

bankruptcy unless the assets must be returned to prevent

fraud or injustice (§543(d), Bankruptcy Code). However,

even if the receiver is appointed less than 120 days before

bankruptcy, the bankruptcy court may exercise discretion

in rare cases and allow the receiver instead of the

bankruptcy trustee to administer the assets:

– if is in the best interest of the creditors; and

– if the debtor is solvent, it is the best interest of equity

holders.

(§543(d), Bankruptcy Code.)

26. May a receiver challenge an involuntary

bankruptcy proceeding in your jurisdiction?

Please explain.

In Texas, there is no speciﬁc statutory authority giving

receivers authority to object to an involuntary bankruptcy

petition. However, the receiver may request that the

bankruptcy court:

• Dismiss an involuntary bankruptcy proceeding on

certain circumstances, including the consent of the

petitioner and the debtor (§303(j), Bankruptcy Code).

• Dismiss or abstain from hearing a bankruptcy case if

it is in the best interest of creditors depending on the

facts and circumstances of the case and the length

of time that a receiver has been in place (§305(a)(1),

Bankruptcy Code).

• Excuse the receiver from compliance under the turnover

requirements of section 543 of the Bankruptcy Code if

the receivership has been in effect for more than 120 days

from the petition date (§543(d)(2), Bankruptcy Code).