California ABC Blog
Assignment for Benefit of Creditors. Business Dissolution. Creditor Rights. California Law.
-
Communicating With Creditors During an ABC: Best Practices
One of the most important factors in a smooth ABC is creditor communication. Creditors who feel informed and treated fairly are less likely to object, litigate, or complain to regulators. Assignees who communicate proactively produce better outcomes and faster closings. What Good Communication Looks Like The assignee should: send prompt initial notice with clear instructions…
-
The ABC Tax Consequences: What Business Owners Need to Know
An ABC has tax consequences for both the assignor (the business owner) and the estate. Understanding those consequences before making the assignment helps owners make informed decisions and avoid unexpected tax liabilities. Gain on Asset Sales When the assignee sells business assets, any gain on the sale is income to the business entity. Depreciated assets…
-
When Creditors Challenge an ABC: The Paths to Litigation
Most ABCs proceed without significant creditor opposition. But some creditors — particularly large secured creditors, former employees with significant wage claims, or creditors who believe preferences were paid — may challenge aspects of the ABC. Understanding when and how challenges arise helps both assignees and business owners anticipate problems. Common Challenge Grounds Creditors may challenge:…
-
ABC Notice Requirements: What Must Be Filed and Where
California law has specific requirements for recording and publishing notice of an ABC. These requirements exist to protect creditors who may not be in direct contact with the business and to establish the official record of the assignment date. Recording and Publication The Assignment Deed must be recorded with the county recorder in the county…
-
How the ABC Protects the Business Owner From Personal Liability
One of the most important questions for a business owner contemplating an ABC is personal liability. If the business can’t pay its creditors, will the owner be personally responsible? The answer depends on several factors — and the ABC itself provides some important protections. Corporate Liability Shield If the business is properly structured as a…
-
California ABC vs. Chapter 11 Reorganization: When Each Makes Sense
Not all insolvent businesses should liquidate. Some have viable operations that could be saved with debt restructuring. For those businesses, the choice is between a Chapter 11 reorganization and winding down through an ABC. The analysis is different depending on what the business actually has. When Chapter 11 Makes Sense Chapter 11 makes sense when:…
-
The ABC and Ongoing Litigation: What Happens to Lawsuits In Progress
When a business makes an assignment, any litigation the business is involved in — whether as plaintiff or defendant — transfers to the assignee. How the assignee handles pending lawsuits affects both the estate’s asset value and its liability exposure. Assignee as Plaintiff If the business has pending claims against others — breach of contract,…
-
Intellectual Property in an ABC: How Intangible Assets Are Handled
For technology companies, brands, and content businesses, intellectual property is often the most valuable asset in an ABC estate. How the assignee identifies, values, and sells IP assets can make the difference between meaningful creditor recoveries and a near-zero distribution. Types of IP in ABC Estates Common IP assets include: software and source code, customer…
-
The ABC and Commercial Leases: What Happens to the Business Location
When a business makes an assignment, its commercial lease is one of the most important assets and liabilities in the estate. How the assignee handles the lease affects both the business wind-down and the landlord’s recovery. The Assignee’s Options The assignee can: assume the lease and assign it to a buyer (in a going-concern sale),…
-
Selling Business Assets in an ABC: The Assignee’s Approach
The assignee’s primary job is to maximize the value of the assigned assets for the benefit of creditors. How they approach asset sales — whether through auction, private sale, going-concern sale, or piece-by-piece liquidation — significantly affects creditor recoveries. Sale Strategies The assignee must choose between: a going-concern sale (selling the business as a functioning…
California ABC System — Assignment for Benefit of Creditors 