Why appointing a Receiver could be the next move after Divorce proceedings

We have covered this topic before, but a stream of new instructions led us to believe that it was worth raising again.

It appears that the current climate (economic not meteorological) is not making it any easier for clients to collect awards from their erstwhile spouse. We are still waiting for that one instruction where it is the ex-wife who has failed to pay up rather than an ex-husband, but it would appear this is not an arena where equality is quite there yet.

The scenario is not one which occurs in all divorces, but it does appear to be increasing. After a long and embattled divorce process, the court makes an award stating that future dated payments are to be made by one party (husband) to the other (wife).

Husband tends to feel that the court has reached the wrong conclusion and feels hugely hard done by. There is quite often an appeal which falters or fails and then due to feeling yet further aggrieved, husband decides he will not (or cannot) make the payments awarded.

Often wife will go to court and ask the court to remind husband of his obligations, which the judge does (nothing upsets a judge more in my experience than not complying with their orders) but still money is not forthcoming and so the wife (and her adviser) wonder what else they can do.

Increasingly the answer seems to be phone Milsted Langdon and appoint us as Receiver. This is a hugely flexible tool available in the collection of any debt, but until recently not often used in the Family courts. However, it is arena in which we find it hugely powerful. One of the reasons it is not often used for civil matters is an imbalance of knowledge. In a normal debt collection matter, the claimant won’t often have huge clarity over the wider financial position of the debtor. In divorce proceedings, however, not only has the former spouse had to complete a Form E detailing all of their assets and liabilities, but their now frustrated ex-spouses often know where all the “bodies are buried”.

This means that the order of appointment can list out exactly those assets over which we have been appointed, and, give us explicit power to sell, transfer or mortgage those assets to enable payment. As we have said before, it is not always the most valuable asset which is the most useful to sell. Often the quick sale of an asset which is close to the husband’s heart gives the wake-up call that this is serious, it isn’t going away and that they need to find the money to make the payments required.

Included in that list of assets is quite often the shares in a private limited company. This, again, is a very strong negotiating position, as whilst selling the business out from under them is difficult (but not impossible), adding new members to the board or removing others brings the reality of the situation home such that sensible solutions can be found.

For more information, please get in touch with our Restructuring and Insolvency team here.

Posted in Insolvency, Newswire.