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Update to Michigan’s Receivership Act

In 2018, Michigan adopted the Uniform Commercial Real Estate Receivership Act (the “Act”), which only applied to receiverships over commercial real estate.  In October 2020, Michigan enacted an amendment to the Act.  The amendment changed the name of the Act to the “Receivership Act” and makes the Act applicable to all operating businesses in Michigan and to commercial and industrial loans with no real estate collateral. The amendment became effective October 15, 2020.  Below is a summary of the key changes to the Act.

  • The Act now applies to all operating businesses in Michigan, rather than only real estate receiverships.

  • A receiver can be appointed in connection with enforcement of any security agreement or lien. Originally, the Act was limited to foreclosure or enforcement of a mortgage. The amendment means a creditor can now use the Act when enforcing any other obligation secured by property or a security agreement.

  • The process for appointment of a receiver is more streamlined and consistent with Michigan Court Rules. A court may still overrule a party’s recommendation, but must provide an explanation, including information on that receiver and his or her qualifications.

  • A receiver can sell assets free and clear of liens, and liens attach to the sale proceeds. Notice to all creditors and other known interested parties and a hearing are required before any such sale.

  • Within seven days after the appointment of a receiver, the owner of the property or business must provide to the receiver the names/contact information for all creditors so that the receiver can then send a notice of the receivership and a copy of the receivership order to all of those parties.

  • There is a provision that allows the receiver to adopt or reject executory contracts, similar to the Bankruptcy Code.

  • There are expanded protections of the receiver from personal lawsuits. Leave of court must be obtained before instituting any action against the receiver or a professional engaged by the receiver.

  • If a distribution to creditors is likely, then the receiver must provide notice and a 90-day period to file claims (similar to a Chapter 7 bankruptcy).

  • The receiver shall file interim quarterly reports.

A copy of the amendment with track changes is available here. The amendment ultimately expands the application of the Act and provides for a more structured appointment process.  For more information, please contact your Foley relationship partner or the authors listed below. 

© 2022 Foley & Lardner LLPNational Law Review, Volume X, Number 353
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About this Author

Andrew T. McClain Finance Lawyer Foley Lardner
Associate

Andrew T. McClain is an associate with Foley & Lardner LLP, where he is a member of the firm’s Bankruptcy & Business Reorganizations Practice. He concentrates his practice on creditors’ rights, out-of-court workouts and restructuring, and commercial litigation.

Andrew has represented secured lenders, special servicers, government-sponsored enterprises, equipment suppliers, and a court-appointed receiver for the Securities and Exchange Commission. His experience includes all facets of creditors’ rights, including judicial and non-judicial commercial foreclosures,...

312.832.5397
Tamar N. Dolcourt, Foley Lardner, bankruptcy Attorney, Restructuring Matters Lawyer, Detroit
Senior Counsel

Tamar Dolcourt is a bankruptcy and restructuring attorney with Foley & Lardner LLP. Ms. Dolcourt represents clients in all aspects of bankruptcy proceedings. She is a member of the firm’s Bankruptcy & Business Reorganizations and Labor & Employment Practices as well as the Energy Industry Team.

Ms. Dolcourt’s diverse bankruptcy practice includes representation of debtors-in-possession in Chapter 11, representation of secured lenders in real estate bankruptcies and representation of unsecured creditors, both individually and on...

313.234.7161
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