An Assignment for the Benefit of Creditors (ABC) is a state-law alternative to Bankruptcy that has been growing in popularity among business owners seeking to dissolve a company. The process involves an appointed Assignee who is tasked with liquidating the insolvent company’s assets and dispersing the proceeds to creditors and relevant stakeholders.
While there are some similarities between a traditional Bankruptcy and an Assignment for the Benefit of Creditors, there are several distinct and significant benefits that have more and more businesses opting for an Assignment for the Benefit of Creditors.
One of the largest benefits of an ABC is the control that it offers the business owner. While bankruptcy requires a Court appointed Trustee to liquidate assets, an ABC allows the business owner to select a qualified Assignee to liquidate the business’s assets.
This results in a much more efficient liquidation process, and allows the business owner to select an Assignee with domain or industry experience that can garner top dollar for the business’s assets.
Since an ABC requires few (if any) court proceedings, the process can typically be completed much more quickly and efficiently than filing for Bankruptcy. This is particularly beneficial when assets need to be liquidated quickly in order to preserve the asset’s value.
Dissolving a company as quickly as possible through an ABC also leads to an overall less expensive liquidation process than with a traditional bankruptcy.
Liquidating a company through an Assignment for the Benefit of Creditors is almost always completed more discreetly than a bankruptcy proceeding. Since an ABC does not require a traditional Court filing, it allows the insolvent business to decide if, how, and when any public announcements are made.
For more information on whether or not an Assignment for the Benefit of Creditors is right for your business, please reach out to Jim Gansman at 201-315-2521.
When a business faces insolvency, it’s often tasked with liquidating assets in order to pay its creditors. One common way to accomplish this is to file for Chapter 7 Bankruptcy. In a Chapter 7 Bankruptcy the liquidation process is administered by a Chapter 7 Trustee assigned by a Federal Bankruptcy judge. The Trustee oversees the liquidation of the debtor’s assets, and disburses the proceeds to creditors.
Recently, a state law alternative to bankruptcy has been growing in popularity with business owners seeking to dissolve companies and liquidate assets. Assignment for the Benefit of Creditors, or “ABC” as it is often abbreviated to, has proven to be a viable alternative to a traditional Chapter 7 Bankruptcy filing that can provide several benefits to businesses faced with insolvency.
The primary distinction between these two liquidation methods is who is tasked with the process of liquidating the business’s assets. In a traditional bankruptcy, the Bankruptcy Court appoints a Trustee to liquidate assets. Alternatively, under an ABC, the business owner selects and hires a third-party to liquidate the business’s assets. Under this approach, the business owner transfers all of the business’s assets to the selected Assignee, and the Assignee then liquidates those assets and disperses the proceeds to creditors.
Since an ABC circumvents the need for the lengthy court process involved in a bankruptcy, it often results in a more streamlined, cost-effective, and faster approach to liquidating a business. Furthermore, it allows business owners to choose an Assignee with domain experience and industry knowledge that can obtain a higher price for the business’s assets.
Since ABCs are a state law, rather than federal law, the exact procedures and laws surrounding the process depend on the state the business operates. Choosing which approach is best for your particular business involves many different factors and requires careful examination by a qualified advisor.
For more information reach out to Jim Gansman at 201-315-2521