Latest developments in and the mechanics of the ABC process, along with tips and strategies for getting a deal closed from the perspective of a leading reorganization and insolvency lawyer:
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BACKGROUND:
It is inevitable that a significant number of companies will come to a point where they are no longer viable and must pursue an ultimate disposition strategy. Companies in financial distress are often forced to liquidate their assets to pay creditors. Options include a Chapter 11 or Chapter 7 bankruptcy filing.
Depending on specific circumstances, if liquid assets are insufficient to all creditors in full, a speedier, less costly, and lower profile alternative in many states, including California, may be an Assignment for the Benefit of Creditors (“ABC”). In California, an ABC sale of the company’s assets is completed as a private transaction without court approval. An ABC process provides a common law alternative to protect the purchasers from fraudulent transfer and successor liability claims that would likely arise if the assets were purchased directly from the insolvent company.
A sale of assets pursuant to an ABC can, in some instances, be completed in a matter of days vs. 30-60 days (or more) required for a court approval of a Section 363 sale in bankruptcy.
SPEAKER:
David S. Kupetz