SB 364 — NC Commercial Receivership Act Revisions.

GENERAL ASSEMBLY OF NORTH CAROLINA SESSION 2019 S 21 SENATE BILL 364 Judiciary Committee Substitute Adopted 4/16/19 Short Title:

Senator Bishop (Primary Sponsor).

Rules and Operations of the Senate March 27, 2019 A BILL TO BE ENTITLED AN ACT TO ENACT THE NORTH CAROLINA RECEIVERSHIP ACT;

*S364-v-2**S364-v-1* General Assembly Of North Carolina Session 2019 (12) Good faith.

(12a) Individual.

– A natural person.

Page 2 Senate Bill 364-Second364-First Edition General Assembly Of North Carolina Session 2019 (20) Person.

– An interest having a duration of more than three years whichwhichgrantsitsholdertherighttouseandoccupyanaccommodation,facility, grantsitsholdertherighttouseandoccupyanaccommodation,facility, or recreational site, whether improved or not, for a specific period less than a full year during any given year.

Senate Bill 364-Second364-First Edition Page 3 General Assembly Of North Carolina Session 2019 (34) Voidable transaction.

– This Article does not apply to any receivership in which the receiver is a State agency or in which the receiver is appointed, controlled, or regulated by a State agency unless otherwise provided bylaw.by law.

– A limited receiver may be appointed before judgment to protect a party that demonstrates an apparent right, title, or interest in property that Page 4 Senate Bill 364-Second364-First Edition General Assembly Of North Carolina Session 2019 is the subject of the action, if the property or its revenue-producing potential is being subjected to or is in danger of waste, loss, dissipation, or impairment, or has been or is about to be the subject of a voidable transaction.

– The order appointing the receiver or subsequent order shall describe the receivership property with particularity appropriate to the Senate Bill 364-Second364-First Edition Page 5 General Assembly Of North Carolina Session 2019 circumstances.

Page 6 Senate Bill 364-Second364-First Edition General Assembly Of North Carolina Session 2019 "§ 1-507.26.

(5) The power to compel any person, including the debtor and any party in interest, bysubpoena pursuant to Rule 45 of the North Carolina Rules of Civil Procedure, to give testimony or to produce and permit inspection and copying of designated books, documents, electronically stored information, electronic data, passwords, access codes, or tangible or intangible things with respect to Senate Bill 364-Second364-First Edition Page 7 General Assembly Of North Carolina Session 2019 any receivership property or any other matter that may affect the administration of the receivership.

Page 8 Senate Bill 364-Second364-First Edition General Assembly Of North Carolina Session 2019 (a) Duties.

– To represent or assist the receiver in carryingout the receiver's duties, the receiver maymayemployattorneys, employattorneys, accountants, appraisers, brokers, agents, auctioneers, or other professionals that do not hold or represent an interest adverse to the receivership.

Senate Bill 364-Second364-First Edition Page 9 General Assembly Of North Carolina Session 2019 In determining reasonable compensation to be paid to the receiver under this subsection, the court shall not be limited to considering any fixed percentage of the receiver's receipts or disbursements, but may consider all relevant facts and circumstances, including the following:

– From time to time, the receiver shall file an updated master service list consisting of the names, mailing addresses, and, where available, e-mail addresses of the debtor, the receiver, all persons joined as parties in the receivership, all persons known bythe receiverto haveasserted aclaimoraninterestofanykind inanypartofthereceivershipproperty, Page 10 Senate Bill 364-Second364-First Edition General Assembly Of North Carolina Session 2019 all persons who have filed a notice of appearance in accordance with this section, and their attorneys, if any.

Senate Bill 364-Second364-First Edition Page 11 General Assembly Of North Carolina Session 2019 Upon executing and filing a bond under G.S.

1-507.41, a general receiver may be joined or substituted as a party in any action or other proceeding that was pending at the time of Page 12 Senate Bill 364-Second364-First Edition General Assembly Of North Carolina Session 2019 appointment in which the debtor is a party.

Senate Bill 364-Second364-First Edition Page 13 General Assembly Of North Carolina Session 2019 (b) Stay by Court Order.

If the act would require seizure of receivership property or commencement of an action prohibited by a stay, the continued perfection shall instead be accomplished by filing a notice in the court before which the receivership is Page 14 Senate Bill 364-Second364-First Edition General Assembly Of North Carolina Session 2019 pending and by serving the notice upon the receiver and receiver's attorney, if any, within the time fixed by law for seizure or commencement of the action.

Senate Bill 364-Second364-First Edition Page 15 General Assembly Of North Carolina Session 2019 (d) Termination of ExecutoryExecutoryContract. Contract.

Page 16 Senate Bill 364-Second364-First Edition General Assembly Of North Carolina Session 2019 The court may order that the receiver's sale of receivership property is free and clear of all liens and all rights of redemption and claims of exemption of the debtor, regardless of whether the sale will generate proceeds sufficient to satisfy fully all liens and claims of exemption on the receivership property, unless all of the following criteria are met:

(1) A secured party's lien or the debtor's claim of exemption in the receivership property to be sold will not be paid in full from the proceeds of the proposed saleand thesecuredpartyorthedebtorfiles atimelyobjectionatimelyobjectionto to thereceiver's motion to sell the receivership property.

– A transfer under subsection (c) of this section may occur by meansotherthanapublicauctionsale.Acreditorholdingavalidmeansotherthanapublicauctionsale.Acreditorholdingavalidlienonthereceivershipproperty lienonthereceivershipproperty to be transferred may purchase the property and offset against the purchase price part or all of the allowed amount secured by the lien if the creditor tenders funds sufficient to satisfy in full the reasonable expenses of transfer and the obligation secured by any senior lien extinguished by the transfer.

Senate Bill 364-Second364-First Edition Page 17 General Assembly Of North Carolina Session 2019 (a) Recommendation of Receiver.

Page 18 Senate Bill 364-Second364-First Edition General Assembly Of North Carolina Session 2019 (7) All other unsecured claims, in each case calculated as of the time of appointment, including the deficiencybalance owingto a holder of an secured claim to the extent not otherwise satisfied under subdivision (1) of subsection (a) of this section, but only if no interest or costs and expenses of collection, including attorneys' fees and expenses, that accrue or are incurred for any period after the time of appointment is included in the calculation of such deficiency balance.

Senate Bill 364-Second364-First Edition Page 19 General Assembly Of North Carolina Session 2019 SECTION 2.(b) Article 38 of Chapter 1 is repealed.

The superior court division is the proper division, without regard to the amount in controversy, for actions for corporate receiverships under a receivership proceeding of a debtor that is not an individual under Article 38A of Chapter 1, Article 38, 1 of the General Statutes, and proceedings under Chapters 55 (North Carolina Business Corporation Act) and 55A Page 20 Senate Bill 364-Second364-First Edition General Assembly Of North Carolina Session 2019 (Nonprofit Corporation Act) Act), andand57D(North 57D (North Carolina Limited LiabilityLiabilityAct) Companyofthe Act) of the General Statutes." SECTION 4.

Senate Bill 364-Second364-First Edition Page 21