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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.Any such sale or liquidation is conducted by the assignee, an independent fiduciary for the benefit of creditors who takes no direction from the assignor’s board or officers.
Thus, the company’s board of directors, officers, and investors need to accept that their control over the company and its assets will cease following commencement of an ABC.
In addition, shareholder equity will have no value unless there is money left to distribute after the costs of the ABC are funded and all creditors have been paid in full.
The Firm’s lawyers are well informed about the many aspects of the assignment process that must be assessed and the obstacles that may arise during the process.
Clients considering assignment for benefit or creditors, as well as court-approved assignees, trust Del Cotto Law Group’s reputation and experience to help them manage the court-supervised liquidation process.
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.
Key factors that drive a company to consider an ABC typically include: There are many other potential causes that may drive an ABC, but a lack of liquidity and strategic options is the overarching theme.
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.
The ABC procedure has long existed in law and is sometimes addressed in state statutes.
In an ABC, a company, referred to as the assignor, transfers all of its rights, title, and interest in its assets to an independent fiduciary known as the assignee, who liquidates the assets and distributes the net proceeds to the company’s creditors.