Texas Business Organizations Code 11.404 – Appointment of Receiver to Rehabilitate Domestic Entity
(a) Subject to Subsection (b), a court that has jurisdiction over the property and business of a domestic entity under § 11.402(b) may appoint a receiver for the entity’s property and business if:
(1) in an action by an owner or member of the domestic entity, it is established that:
(A) the entity is insolvent or in imminent danger of insolvency;
(B) the governing persons of the entity are deadlocked in the management of the entity’s affairs, the owners or members of the entity are unable to break the deadlock, and irreparable injury to the entity is being suffered or is threatened because of the deadlock;
(C) the actions of the governing persons of the entity are illegal, oppressive, or fraudulent;
(D) the property of the entity is being misapplied or wasted; or
(E) with respect to a for-profit corporation, the shareholders of the entity are deadlocked in voting power and have failed, for a period of at least two years, to elect successors to the governing persons of the entity whose terms have expired or would have expired on the election and qualification of their successors;
(2) in an action by a creditor of the domestic entity, it is established that:
(A) the entity is insolvent, the claim of the creditor has been reduced to judgment, and an execution on the judgment was returned unsatisfied; or
(B) the entity is insolvent and has admitted in writing that the claim of the creditor is due and owing; or
(3) in an action other than an action described by Subdivision (1) or (2), courts of equity have traditionally appointed a receiver.
(b) A court may appoint a receiver under Subsection (a) only if:
(1) circumstances exist that are considered by the court to necessitate the appointment of a receiver to conserve the property and business of the domestic entity and avoid damage to interested parties;
(2) all other requirements of law are complied with; and
(3) the court determines that all other available legal and equitable remedies, including the appointment of a receiver for specific property of the domestic entity under § 11.402(a), are inadequate.
Terms Used In Texas Business Organizations Code 11.404
- Business: means a trade, occupation, profession, or other commercial activity. See Texas Business Organizations Code 1.002
- Domestic: means , with respect to an entity, that the entity is formed under this code or the entity's internal affairs are governed by this code. See Texas Business Organizations Code 1.002
- Domestic entity: means an organization formed under or the internal affairs of which are governed by this code. See Texas Business Organizations Code 1.002
- Entity: means a domestic entity or foreign entity. See Texas Business Organizations Code 1.002
- Equitable: Pertaining to civil suits in "equity" rather than in "law." In English legal history, the courts of "law" could order the payment of damages and could afford no other remedy. See damages. A separate court of "equity" could order someone to do something or to cease to do something. See, e.g., injunction. In American jurisprudence, the federal courts have both legal and equitable power, but the distinction is still an important one. For example, a trial by jury is normally available in "law" cases but not in "equity" cases. Source: U.S. Courts
- in writing: includes any representation of words, letters, or figures, whether by writing, printing, or other means. See Texas Government Code 312.011
- Insolvency: means the inability of a person to pay the person's debts as they become due in the usual course of business or affairs. See Texas Business Organizations Code 1.002
- Insolvent: means a person who is unable to pay the person's debts as they become due in the usual course of business or affairs. See Texas Business Organizations Code 1.002
- Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
- Law: means , unless the context requires otherwise, both statutory and common law. See Texas Business Organizations Code 1.002
- Member: means :
(A) in the case of a limited liability company, a person who has become, and has not ceased to be, a member in the limited liability company as provided by its governing documents or this code;
(B) in the case of a nonprofit corporation, a person who has membership rights in the nonprofit corporation under its governing documents;
(C) in the case of a cooperative association, a member of a nonshare or share association;
(D) in the case of a nonprofit association, a person who has membership rights in the nonprofit association under its governing documents; or
(E) in the case of a professional association, a person who has membership rights in the professional association under its governing documents. See Texas Business Organizations Code 1.002 - Property: includes tangible and intangible property and an interest in that property. See Texas Business Organizations Code 1.002
(c) If the condition necessitating the appointment of a receiver under this section is remedied, the receivership shall be terminated immediately, the management of the domestic entity shall be restored to its managerial officials, and the receiver shall redeliver to the domestic entity all of its property remaining in receivership.