In the case of Zutrau v. Jansing, C.A. No. 7457-VCP (Del. Ch. Mar. 18, 2013), the Court of Chancery recognized the right to appoint a receiver over a solvent corporation under particular circumstances.
The Court reiterated that a “strong showing” must be made for the appointment of a receiver over a solvent corporation based on fraud and fiduciary misconduct. Additional reasons for the Court to exercise this right include: “positive misconduct by corporate officers, breach of trust or extreme circumstances showing imminent danger of great loss which cannot otherwise be prevented.” Further, the Court indicated that “mere dissension among corporate stockholders seldom, if ever, justifies the appointment of a receiver for a solvent corporation.”
In this case, the Court denied respondent’s motion to dismiss based on the fact that if the allegations were proven true related to fraud and mismanagement, they are “sufficient to state a claim that might, at some later stage, lead to the Court’s appointing a custodian to the corporation.”
For a further discussion regarding the appointment of a receiver, see our Directors’ and Shareholders’ Reference Guide to Summary Proceedings in the Delaware Court of Chancery.