Short answer. Before issuing the order, the court requires the applicant to file a bond in favor of the opposing party, in a court-fixed amount, conditioned on paying all damages that party sustains if the appointment turns out to have been procured without sufficient cause. The court may also require an additional bond later, at its discretion.
What the law says
Before issuing the order appointing a receiver the court shall require the applicant to file a bond executed to the party against whom the application is presented, in an amount to be fixed by the court, to the effect that the applicant will pay such party all damages he may sustain by reason of the appointment of such receiver in case the applicant shall have procured such appointment without sufficient cause; and the court may, in its discretion, at any time after the appointment, require an additional bond as further security for such damages.
Rule 59, Section 2 — Bond on appointment of receiver. Read the full provision →
The bond is a precondition to appointment
Rule 59, Section 2 makes clear that a court cannot issue the order appointing a receiver until the applicant has filed a bond. This sequencing means the party against whom the application is presented has a source of protection lined up before their property is placed under receivership, not after — the bond has to exist first, so the appointment itself cannot take effect as a fait accompli that leaves the opposing party scrambling for security afterward.
What the bond guarantees
The bond is executed in favor of the party against whom the application was presented, and it is conditioned on the applicant paying that party all damages sustained if it later turns out the appointment was procured without sufficient cause. This mirrors the logic behind attachment and injunction bonds — provisional remedies carry real costs if they turn out to be unjustified, so the applicant bears the risk upfront.
Discretion to require more security later
The section does not treat the initial bond as necessarily final. It expressly gives the court discretion, at any time after the appointment, to require an additional bond as further security for the same category of damages, allowing the security to be adjusted as the receivership proceeds and the stakes become clearer. This matters where the receivership drags on longer than expected, or where the property under receivership turns out to be more valuable than the original bond amount anticipated.
Why the bond runs to the opposing party, not the court
The bond is made out in favor of the party against whom receivership is sought, not the court or the receiver, because that party is the one who stands to lose if the receivership turns out to have been unjustified — their property or business could be disrupted, its value diminished, or opportunities lost while a receiver holds and manages it. Making the bond payable directly to them gives that risk a concrete, court-enforceable remedy from the outset.
Related provisions
- Rule 59, Section 2 — Bond on appointment of receiver
- Rule 59, Section 3 — Denial of application or discharge of receiver
- Rule 59, Section 5 — Service of copies of bonds; effect of disapproval of same