Assignment for Benefit of Creditors
Whether the distressed business is a corporation, a limited liability company or a partnership, or whether it is an institutional lender faced with a troubled credit or a venture capital firm with a distressed portfolio company, one option is an Assignment for Benefit of Creditors. Insolvency Services Group (ISG) specializes in tailoring this process to meet the needs of the distressed company, consistent with the legal rights of and duties to creditors.
ISG assesses and confers with the distressed company and its management to determine whether a general assignment is the appropriate tool. ISG offers a team of experts to analyze the details of each unique situation and develop a deal structure based on sound business and legal principles which will withstand scrutiny.
The major advantages of an Assignment are:
- Simplicity. No court filing for assignments made under California law. In California, there is no court involved in the commencement or supervision of general assignments – it is an out of court contractual device. The laws of assignments in other states vary and ISG can assist companies in determining the applicable requirements for commencing and pursuing a general assignment for companies located outside of California.
- Speed. Because, unlike a bankruptcy case, no California court oversees general assignments, there is no formal court approval for the disposition of assets. That means greater flexibility and less delay in selling and disposing of assets with a greater net recovery to creditors and other parties in interest.
- Better Choices. Distressed companies have the ability to choose an assignee, as opposed to a Chapter 7 bankruptcy, in which the bankruptcy trustee is appointed by the Office of the United States Trustee. The choice of a reputable assignee is critical. A well-recognized and respected assignee is better able to drive the process to a successful conclusion and defend an involuntary bankruptcy petition should creditors seek to challenge the general assignment. ISG is experienced in running actual claim processes by carefully maintaining a claims register and claims filed by creditors. ISG maintains a creditor hot line in its effort to be immediately responsive to creditor inquiries, which minimizes or eliminates problems.
- Secured Creditor Cooperation. A general assignment is preferred by secured creditors, as it reduces their own legal costs as well as the risks related to asset sale and foreclosure. In bankruptcy there are a number of traps for the unwary, but in a general assignment – given ISG’s unique, in-house legal expertise – the distressed company is better able to steer around hidden obstacles.
- Resolution is faster and the overall expense lower.