Assignment For Benefit Of Creditors

Assignment For Benefit Of Creditors-49
The following are examples of fact patterns involving companies that could be a good fit for an ABC: As in most insolvency proceedings, a lack of liquidity and an increasingly upside-down balance sheet eventually force a company to confront the reality of its financial condition.

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Fourth, certain investor groups or board members may prefer an ABC to a federal bankruptcy filing due to the lower visibility of an ABC.The document that assigns the property authorizes the assignee to liquidate the debtor’s property to satisfy creditors’ claims against the debtor as quickly as possible.Del Cotto Law Group represents debtors, creditors, and assignees in ABC’s.A business under financial stress should consider an Assignment for the Benefit of Creditors (“ABC”) as an option in lieu of filing for bankruptcy.An ABC offers a level of flexibility that bankruptcy does not and can be a cost effective tool, depending on the goal of the business.The necessary percentage of shareholders who must consent is governed by a company’s corporate governance documents.An assignee generally relies on the corporate counsel of the assignor to clarify the required shareholder percentages as part of the vetting process to confirm proper effectuation of an ABC.Finally, secured creditors generally support an ABC if they believe that the budget for the process is reasonable (less than alternatives) and that the assignee will return proceeds in a timely manner post-ABC after investigating and validating the creditors’ secured position.In sum, the increased value of the monetization of the assets coupled with lower costs will hopefully result in a distribution to unsecured creditors at a higher rate in an ABC process as compared to other alternatives, such as a bankruptcy liquidation.Del Cotto Law Group understands financial distress can grow over time or arise suddenly.Our lawyers have broad and deep experience and a calm level-headedness which fosters our analysis of each individual situation.

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