328:
the price the assets fetched when sold. Most dividends are in the form of cash back to the creditor, but not necessarily all. There may not even be a dividend in certain instance, thus no creditor receives any payment. There is no way to determine the cash value of an asset in the assignment process, regardless of past estimates. Tangible assets cash value can usually, but not always, be reasonably estimated. Intangible assets such as intellectual property or processes are much more difficult to evaluate.
234:
make the creditors whole. The assignee performs duties similar to a trustee under federal bankruptcy. The assignee has a similar, if not equivalent, fiduciary role as the bankruptcy trustee. The assignee has the primary responsibility to: liquidate the assets of the company; vette creditor claims; and issue a dividend to the creditors. The creditors are the assignee's top priority, not shareholders. Shareholders by definition have a residual claim on assets once all creditors are satisfied.
127:
25:
337:
usually is best equipped to handle the legal end of the process for the company making the assignment. This is not asserted to diminish an attorney's capabilities, but to stress the legal niche that this legal instrument falls within, bankruptcy. Non legal staff familiar with bankruptcy and the assignment process can also affect the speed validity of the process.
212:, a general assignment or an assignment for the benefit of creditors is simply a contract whereby the insolvent entity ("Assignor") transfers legal and equitable title, as well as custody and control of its property, to a third party ("Assignee") in trust, to apply the proceeds of sale to the assignor's creditors in accord with priorities established by law.
242:
assignee may issue a non-cash dividend as part of the overall dividend to creditors on their claims, but a dividend of this type is not common. If all the creditors are made whole, shareholders would then have a claim on the remainder of the dividend. This holds true only if there are no other classes of equity that have priority senior to the shareholders.
388:, any general assignment, either absolute or by way of security, of book debts is void unless registered under the Bills of Sale Act 1878. A trustee would not be able to attack an assignment under this section which relates to debts due from specified debtors or debts becoming due under specified contracts or where the debts were assigned as part of a
327:
The dividend is hopefully the payout that the assignee issues, once all creditors' claims have been vetted and all the assets have been sold. The assignee hopes to generate enough cash to provide a one for one redemption of a creditor's claims. This is the hope the reality varies vastly, depending on
303:
In situations where the liquidation value of the assets is less than a secured creditor's lien, the assignment process can be done, however a vast number of legal questions need to be reconciled before the assignment process can possibly be initiated. There unfortunately is no concise answer in this
275:
If there has been a determination by company management and interested parties such as a secured creditor that even after restructuring, a "going concern" may still not be viable, a secured creditor or group of secured creditors frequently may encourage the company's senior management to pursue this
257:
A Federal
Bankruptcy Court judge in a Chapter 7 bankruptcy must approve the sale of the bankrupt company's assets, thus adding time and expense on to the entire liquidation process. The assets sold in an assignment for the benefit of creditor process do not usually require a judge's intervention. It
233:
The physical filing of the assignment usually occurs after: the board of directors has spoken with local insolvency counsel; a board of directors authorization of some nature has been enacted; an appropriate assignee chosen; and the contract has been written. The assignee's primary goal is to try to
336:
Noted earlier this is a state form of bankruptcy, not federal form. The assignment process or any bankruptcy process for that matter is a legal matter. The state attributes of an assignment process may be understood by any attorney however a local/regional bankruptcy attorney in the specific state
299:
or any other creditor prior to the assignment process. Cooperation of the secured creditor may however affect the assignee's ability to liquidate an asset. An assignee in practice may obtain the consent of the secured creditors in advance of the assignment to ensure that the assignee can liquidate
229:
The assignment for the benefit of creditors is a common law contract between the board of directors and the assignee in which the board "assigns" the assets and liabilities of the company to the assignee, a third party. The assignment for the benefit of creditors contract is usually recorded the
266:
Secured and unsecured creditors constitute the creditor body. Both secured and unsecured creditors are ahead of shareholders as noted earlier. A secured creditor is a creditor, who has a priority claim on an asset or assets of a company. A lien on the specific asset or assets places the secured
241:
The claims process is similar to a standard bankruptcy action in which creditors submit claims to the assignee for review and acceptance. The acceptance and vetting of claims is an important process to ensure that no one creditor has overstated their claim. There are rare occasions in which an
215:
An assignment for the benefit of creditors is a relatively well-established common law tool and is one alternative to a bankruptcy. An assignment for the benefit of creditors is designed to save time and expense by concluding the affairs of a bankrupt company. The assignment for the benefit of
237:
The assignee, once the assignment process is completed, issues a dividend. The dividend is derived from the sale of assets, collection of receivables, recovery of the bankrupt company's assets and cash. Certain creditors may or may not receive a dividend. The assignee's hope is to provide a
365:
In other common law countries, general assignments usually refer to any general assignment of existing or future book debts by a natural person (including, in some cases, partnerships). A general assignment made by a natural person who is subsequently adjudged bankrupt is
253:
as needed. Neither the federal bankruptcy court nor a state court usually oversee this process, however the assignee is subject in most cases to a look back provision within the state the assignment took place.
220:
bankruptcy and parallels some of the same procedures, but is not an actual "bankruptcy". The creditors do not get any input into the procedure and a court is not needed either, so the process is faster.
267:
creditor's claim ahead of the unsecured creditor. Once a secured creditor is satisfied, the unsecured creditor is then the next priority. This is again the normal order of priority in a bankruptcy.
258:
is this removal of the court from the liquidation process which increases the speed of the assets sold in an assignment process. This is one substantial difference from a regular bankruptcy.
307:
Secured creditors may in certain instances assume the senior management roles within the bankrupt company, however noted earlier this situation occurs when the secured creditor(s) have
319:
can not enter into that contract on behalf of the bankrupt company. Only the bankrupt company's senior management and/or board of directors have the power to do an assignment.
300:
the asset or assets in a timely manner without a secured party stopping or holding up the assignment process. Secured party consent in this case is optional, not necessary.
216:
creditors is a state form of bankruptcy action versus a federal form of bankruptcy action. The assignment for the benefit of creditor's process is similar in character to a
373:
The definition of book debts includes "debts which in the ordinary course of business would be entered in a well-kept trade book", future debts and future rents under a
230:
public record at a town, a city, a county or a state level. Each state will differ on recording requirements for the assignment for the benefit of creditors contract.
276:
liquidation mechanism. Secured creditor(s) may encourage this type of action to relieve themselves of the legal costs and risks associated with the
238:
one-to-one redemption of the creditor's claims; however, this depends on the amount of cash an assignee can marshal in the liquidation process.
137:
370:
against the trustee in bankruptcy as regards any book debts which have not been paid prior to the presentation of the bankruptcy petition.
357:
or limited liability company that owes anything to anyone. Any debtor owning property has the common law right to make an assignment.
284:. One specific risk a secured creditor wants to avoid is preference or the perception of preference in the liquidation process (see
250:
246:
217:
89:
61:
68:
42:
171:
108:
75:
249:, generally secured, and unsecured in descending order. The assignee, depending on the specific state law may use
411:
57:
46:
153:
149:
35:
82:
145:
281:
8:
467:
285:
245:
The order of creditor's claims usually follows the normal bankruptcy order prescribed in
200:. One form is an "assignment for the benefit of creditors", abbreviated ABC or AFBC.
291:
In situations where the liquidation value of the assets exceeds a secured creditor's
196:
in which an insolvent entity's assets are assigned to someone as an alternative to a
394:
transfer of a business or the assignment is for the benefit of creditors generally.
315:. Large secured creditors again may influence the decision making process, but that
378:
316:
296:
193:
461:
374:
209:
381:
also fall within the definition of book debts, but a bank balance does not.
385:
354:
350:
277:
367:
308:
197:
390:
24:
295:, the assignee is not normally required to obtain the consent of a
346:
136:
deal primarily with the United States and do not represent a
349:
may make an assignment. This would include any individual,
312:
292:
412:"What Are ABCs? Assignment for the Benefit of Creditors"
49:. Unsourced material may be challenged and removed.
459:
340:
331:
360:
270:
134:The examples and perspective in this article
172:Learn how and when to remove this message
109:Learn how and when to remove this message
251:Chapter 7, Title 11, United States Code
460:
120:
47:adding citations to reliable sources
18:
437:Re Siebe Gorman v Barclays Bank Plc
13:
14:
479:
203:
125:
23:
34:needs additional citations for
442:
430:
418:
404:
1:
397:
345:The general rule is that any
341:General assignment attributes
332:Key attributes of the process
261:
224:
7:
322:
148:, discuss the issue on the
10:
484:
361:Other common law countries
271:Secured creditor influence
16:Concept in bankruptcy law
304:particular situation.
247:a Chapter 7 bankruptcy
425:Re Shipley v Marshall
384:Under (for example)
154:create a new article
146:improve this article
58:"General assignment"
43:improve this article
286:fraudulent transfer
186:general assignment
449:Re Brightlife Ltd
379:Bills of exchange
182:
181:
174:
156:, as appropriate.
119:
118:
111:
93:
475:
452:
446:
440:
439:2 Lloyds Rep 142
434:
428:
422:
416:
415:
408:
317:secured creditor
297:secured creditor
280:and sale of its
192:is a concept in
177:
170:
166:
163:
157:
129:
128:
121:
114:
107:
103:
100:
94:
92:
51:
27:
19:
483:
482:
478:
477:
476:
474:
473:
472:
458:
457:
456:
455:
447:
443:
435:
431:
423:
419:
414:. 19 July 2011.
410:
409:
405:
400:
363:
343:
334:
325:
273:
264:
227:
206:
178:
167:
161:
158:
143:
130:
126:
115:
104:
98:
95:
52:
50:
40:
28:
17:
12:
11:
5:
481:
471:
470:
454:
453:
441:
429:
417:
402:
401:
399:
396:
362:
359:
342:
339:
333:
330:
324:
321:
272:
269:
263:
260:
226:
223:
205:
202:
194:bankruptcy law
180:
179:
140:of the subject
138:worldwide view
133:
131:
124:
117:
116:
31:
29:
22:
15:
9:
6:
4:
3:
2:
480:
469:
466:
465:
463:
450:
445:
438:
433:
426:
421:
413:
407:
403:
395:
393:
392:
387:
382:
380:
376:
375:hire purchase
371:
369:
358:
356:
352:
348:
338:
329:
320:
318:
314:
310:
305:
301:
298:
294:
289:
287:
283:
279:
268:
259:
255:
252:
248:
243:
239:
235:
231:
222:
219:
213:
211:
210:United States
204:United States
201:
199:
195:
191:
187:
176:
173:
165:
155:
151:
147:
141:
139:
132:
123:
122:
113:
110:
102:
91:
88:
84:
81:
77:
74:
70:
67:
63:
60: –
59:
55:
54:Find sources:
48:
44:
38:
37:
32:This article
30:
26:
21:
20:
448:
444:
436:
432:
424:
420:
406:
389:
383:
377:agreement.
372:
364:
344:
335:
326:
306:
302:
290:
274:
265:
256:
244:
240:
236:
232:
228:
214:
207:
189:
185:
183:
168:
159:
135:
105:
99:January 2016
96:
86:
79:
72:
65:
53:
41:Please help
36:verification
33:
386:English law
355:corporation
351:partnership
278:foreclosure
162:August 2022
468:Bankruptcy
427:4 C.B. 566
398:References
309:foreclosed
282:collateral
198:bankruptcy
190:assignment
69:newspapers
391:bona fide
311:on their
262:Creditors
225:Mechanism
218:Chapter 7
150:talk page
462:Category
451:1 Ch 200
323:Dividend
144:You may
208:In the
83:scholar
347:debtor
85:
78:
71:
64:
56:
152:, or
90:JSTOR
76:books
368:void
313:lien
293:lien
62:news
288:).
188:or
45:by
464::
353:,
184:A
175:)
169:(
164:)
160:(
142:.
112:)
106:(
101:)
97:(
87:·
80:·
73:·
66:·
39:.
Text is available under the Creative Commons Attribution-ShareAlike License. Additional terms may apply.
