Legal Definitions - store-receiver exemption

The store-receiver exemption, also known as the Aiken exemption, is a specific legal provision that allows a court-appointed receiver to purchase new inventory or supplies necessary for the continued operation of a business that is in receivership. The crucial aspect of this exemption is that these newly acquired goods are generally not immediately subject to pre-existing liens or claims held by creditors that arose *before* the receiver was appointed.

The primary purpose of this exemption is to enable a business to continue functioning and generating revenue during the receivership process. By allowing the receiver to acquire essential new stock, the business can maintain its operations, potentially be sold as a "going concern" (an active business) rather than being immediately liquidated. Selling a business as a going concern often results in a higher recovery for all creditors involved compared to a piecemeal liquidation. A receiver is a neutral third party appointed by a court to manage the assets and operations of a business facing financial distress, with the goal of preserving its value for the benefit of creditors and other stakeholders.

• Example 1: A Local Bookstore's New Releases

  Imagine "The Cozy Corner Bookstore" is experiencing financial difficulties, and a court appoints a receiver to manage its assets and operations. To keep the store attractive to customers and maximize sales of its existing inventory, the receiver determines it's crucial to stock a small selection of newly released bestsellers. Under the store-receiver exemption, the receiver can purchase these new books. Even though a bank holds a pre-existing lien on all of the bookstore's inventory from before the receivership, these *newly purchased* books are not immediately subject to that lien. This allows the store to continue operating, draw in customers, and potentially generate more revenue from both old and new stock, ultimately benefiting the creditors by preserving the business's value.

• Example 2: A Boutique Bakery's Fresh Ingredients

  "Sweet Delights Bakery" has entered receivership due to financial challenges. The court-appointed receiver wants to keep the bakery open to sell its remaining baked goods and equipment as a going concern. To do this, the bakery needs fresh ingredients daily, such as flour, eggs, and milk, which are perishable. The store-receiver exemption allows the receiver to purchase these essential fresh ingredients. Without this exemption, a supplier who had an outstanding invoice from before the receivership might try to claim these new ingredients, making it impossible for the bakery to continue production. By applying the exemption, the receiver ensures the bakery can continue baking, maintain its customer base, and generate revenue, increasing the likelihood of a successful sale of the business.

• Example 3: An Auto Parts Store's Essential Components

  "Reliable Auto Parts" is placed into receivership. The receiver identifies that the store has a large stock of common parts but is missing a few critical, fast-moving components that customers frequently request. To avoid losing sales and to make the existing inventory more appealing to potential buyers, the receiver decides to order a limited quantity of these essential components. The store-receiver exemption protects these new purchases from being immediately claimed by a secured creditor who had a blanket lien on all of the store's inventory prior to the receivership. This enables the receiver to maintain the store's operational viability, fulfill customer demand, and present the business as a more attractive and functional entity to prospective purchasers, thereby maximizing its value for all creditors.