California ABC Blog
Assignment for Benefit of Creditors. Business Dissolution. Creditor Rights. California Law.
-
Using the ABC to Preserve Business Relationships During Insolvency
One of the least-discussed advantages of the ABC over bankruptcy is the effect on business relationships. Suppliers, customers, and partners often react differently to an ABC than to a bankruptcy filing — and that difference affects what can be achieved in the wind-down. Why Relationships Matter An ABC — which is private, professionally administered, and…
-
What Happens to Your Business Name and Brand in an ABC
The business name, logo, and brand assets are property of the estate in an ABC. The assignee controls them and can sell them to a buyer. For some business owners, this is emotionally significant — the brand they built has real commercial value. Brand as Estate Asset A well-known brand in a defined market can…
-
What to Ask an ABC Assignee Before Hiring Them
Business owners who are selecting an assignee have one opportunity to evaluate candidates before handing over control of all business assets. These questions reveal whether an assignee is prepared for your specific situation. Key Interview Questions Ask: How many California ABCs have you administered in the past three years? What is your typical fee structure…
-
How Creditors Can Monitor an ABC Assignee
Creditors who have filed claims in a California ABC have the right to monitor the assignee’s administration. Knowing how to exercise that right — and when to push — protects creditor interests. Monitoring Tools Request copies of the assignee’s periodic accountings. Ask for updates on asset sales and their prices. Attend any creditors’ meetings. If…
-
ABC Checklist: 10 Things to Do Before You Sign the Assignment Deed
Signing the Assignment Deed is irrevocable. These 10 steps ensure you’re fully prepared before you cross that threshold. The Pre-Assignment Checklist 1. Complete lien search. 2. Compile full creditor list. 3. Select and vet your assignee. 4. Identify all personal guarantees. 5. Review the 90-day preference window. 6. Gather and organize all business records. 7.…
-
The ABC and Nonprofit Organizations: Special Rules for Charitable Wind-Downs
California’s ABC statute is not limited to for-profit businesses — nonprofit organizations can also use the ABC to wind down when they become insolvent. The process has important differences from a for-profit ABC. Nonprofit ABC Issues Nonprofit assets are subject to restrictions that for-profit assets aren’t. Charitable assets must be used for charitable purposes —…
-
ABC Final Distribution: The Math Behind Pro-Rata Payment
When the assignee is ready to make distributions, the calculation follows a specific sequence that reflects the priority waterfall. Understanding the math helps creditors calibrate their expectations. The Distribution Calculation Start with total net proceeds from asset sales. Subtract administration expenses. The remainder flows to the priority waterfall: secured creditors first (from their collateral proceeds),…
-
How to Tell If an ABC Is Right for Your Business: The Decision Framework
The decision to make an ABC requires honest assessment of the business’s position. Not every insolvent business is an ABC candidate — and choosing the wrong path wastes time and money. The Right Profile ABCs work best when: the business has assets that justify the cost of administration, the business owner wants to wind down…
-
ABC for Tech Startups: What Happens to VC-Backed Companies
Venture-backed technology startups present a distinctive ABC profile. The typical startup has: significant cash burn, IP-heavy assets, complex capital structures with preferred stock, and investor agreements that may constrain the wind-down options. VC-Backed Company Issues Key issues include: investor consent rights under the charter or investor agreements (which may require approval from preferred holders before…
-
Understanding the ABC’s Role in California’s Commercial Law Ecosystem
The ABC exists at the intersection of several bodies of California law: commercial law, creditor rights, insolvency, employment, real property, and contract law. Understanding where the ABC fits in this ecosystem helps practitioners and business owners use it effectively. The Statutory Framework California’s ABC is governed primarily by California Civil Code §§ 1800-1802 and California…
California ABC System — Assignment for Benefit of Creditors 