Under Delaware law, the board of directors is generally responsible for overseeing the business and affairs of the corporation. However, where the board is incapable or unwilling to act and in other unique circumstances described below, the Delaware General Corporation Law allows stockholders, directors, creditors and other interested parties to attempt to displace the board’s decision-making authority through the appointment of a custodian, receiver or trustee for the corporation.
A custodian, receiver or trustee is a third party who is given authority by a court to act on behalf of the corporation, typically for a limited duration and charged with completing one or more court-defined tasks. While often used interchangeably (including in the statutes), the term “custodian” is usually used to refer to a court-appointee for a solvent corporation, while the terms “receiver” or “trustee” are more often used when the corporation is dissolved or insolvent. Delaware Court of Chancery Rules 148 through 168 provide that a receiver must be a Delaware resident, and set forth certain powers and duties of a receiver. However, the application of those rules (and the Delaware residency requirement) can be waived or modified by the Court of Chancery in appropriate circumstances. For ease of reference, this article uses the general term “receiver” to refer to a receiver, custodian or trustee.
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