When a business is struggling to stay afloat, and there is a good reason to keep its operations running instead of shutting it down, putting the business in receivership may be an option. Right now, there are several nursing homes in Wisconsin making headlines for their decision to go into receivership. They provide a good example of how the whole process works.
Eight More Wisconsin Nursing Homes Go Into Receivership
This spring, eight skilled nursing facilities — aka nursing homes — run by a company called Dycora Transitional Health & Living were placed into receivership. The facilities will all remain open for the time being, but they will be operated by another company while a buyer is sought. Unless something comes up, the residents will not have to move out and the employees who work there will continue to get paid.
According to the Milwaukee Journal Sentinel, “Dycora is the third company to have its Wisconsin nursing homes placed in receivership in roughly the past two years… In September, Atrium Health and Senior Living reached an agreement with its lender to have a receiver appointed for 23 nursing homes and nine assisted living centers in Wisconsin and one nursing home in Michigan. Similarly, the Fortis Management Group reached a similar agreement with its landlord to have a receiver appointed for its 65 nursing homes and assisted living centers in six states, including 28 in Wisconsin, in July 2017.
The crush of receiverships, and in other instances closures, is blamed on Wisconsin’s low Medicaid reimbursement rate.
How Does Receivership Work?
Receivership is an alternative to bankruptcy. Instead of winding things down and selling off assets through the bankruptcy process, the business stays open but makes it clear that it is in trouble and is looking for someone else to take over its operations.
A company placed into receivership has a person known as a receiver appointed by the courts. The receiver can pay employees and vendors, and hire someone to keep the business running while looking for a buyer.
Receivership is an attractive option for the business owner, who would otherwise be forced to file for bankruptcy. Compared to bankruptcy, a receivership is cheaper, and it is a faster way to sell off a business.
When the business is providing an important service, as a nursing home does, receivership makes sense from a public good perspective. The employees will continue to get paid, and the people in the facilities will continue to be cared for. If the business filed for bankruptcy or shut down, the residents would be at risk of losing their home and not being properly cared for, and the employees would lose their jobs.
Buyers may be interested in purchasing a business in receivership because the company is selling for a good price, and because they can theoretically turn a profit more quickly by buying a business that is already up and running.
Not An Option For Everyone
Going into receivership is not an option for every troubled business. Winding down operations or going into bankruptcy is better in some circumstances, and negotiating a workout is better in others. What options are available to your business depend on the situation you are in. If you would like to find out what paths forward are open to your business, please contact our experienced team at Hanson & Payne, LLC to schedule an initial consultation.