Assignment for benefit of creditors (“ABC”) laws are, historically, a debtor remedy. ABC laws are a voluntary debtor tool for shutting down and winding up the debtor’s failed business.
Ancient History
ABC laws began under the common law, back in merrie olde England, arising out of the law of trusts. Under trust law, any person can, without restriction, transfer assets into a trust for the benefit of one or more people.
A bankruptcy court ruled that a creditor didn’t need to seek derivative standing to sue a liquidating trustee. The creditor, himself a trustee of the debtor’s employee stock-option plan, had standing to sue without prior court permission because his suit wasn’t brought on behalf of the bankruptcy estate. In re Foods, Inc., Case No. 14-02689, Adv. Pro. No. 21-3022, 2022 Bankr. LEXIS 2331 (Bankr. S.D. Iowa Aug. 23, 2022).
Bankruptcy is a formal process geared toward preserving stakeholder value. Often, the proceedings include negotiations between stakeholders that are arduous, time-consuming and expensive. As such, the main focus during bankruptcy tends to be on completing the process, rather than positioning the company for healthy and sustainable growth after emergence.
“Under the long-standing ‘solvent-debtor exception,’ plaintiffs [unsecured trade creditors] possess an equitable right to receive post-petition interest at the contractual or default state law rate, subject to any other equitable considerations, before [the debtor] collects surplus value from the bankruptcy estate,” held the Ninth Circuit on Aug. 29, 2022. In re PG&E Corporation, 2022 WL 3712498, *4 (9th Cir. Aug. 29, 2022) (2-1).
The Bankruptcy Protector
On August 28, 2022, Hauppauge, N.Y.-based Packable Holdings, LLC, a privately-owned tech-enabled e-commerce company, filed a petition for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the District of Delaware (Case No. 22-10797). The company reports $100 million to $500 million in both assets and liabilities.
On July 29, 2022, Laurie S.
As has been widely reported, Congress recently reauthorized the $7.5 million debt threshold for subchapter V small business debtors, making subchapter V available to a significantly larger number of struggling businesses. With this change, the other requirements for a debtor to be eligible to elect subchapter V, takes on new importance.
On August 11, 2022, the US National Association of Insurance Commissioners’ (“NAIC”) Executive (EX) Committee adopted a request from the Restructuring Mechanisms (E) Working Group (“RM Working Group”) to reopen the Property & Casualty Insurance Guaranty Association Model Act (#540) (“Model Act #540”) for amendment to ensure that policyholders will retain guaranty fund coverage following an insurance business transfer (“IBT”) or corporate division (“CD”).
In Stream TV Networks, Inc. v. SeeCubic, Inc., the Delaware Supreme Court reversed the Delaware Court of Chancery’s finding that the board of Stream TV Networks, Inc. (Stream) could sell all of Stream’s assets without a stockholder vote due to Stream’s insolvency. The Delaware Supreme Court found that the sale agreement – in essence, a privately structured foreclosure transaction – constituted an “asset transfer” under Stream’s charter, triggering a class vote provision that required the approval of Stream’s Class B stockholders.