ASSIGNMENT FOR THE BENEFIT OF CREDITORS (ABC) – GENERAL/CREDITOR ASSIGNMENT
An Assignment for the Benefit of Creditors (ABC – “Assignment”) can be a prudent alternative to bankruptcy for troubled private and public companies and their creditors.
The process of an ABC or General Assignment is initiated by the distressed entity (assignor) entering into an agreement with the assignee responsible for conducting the wind-down and/or liquidation or going concern sale in a fiduciary capacity for the benefit of the assignor’s creditors. The assignment agreement is a contract under which the assignor transfers all of its right, title, interest in, and custody and control of its property to the assignee in trust. The assignee divests the property and distributes the proceeds to the assignor’s creditors.
An Assignment for the Benefit of Creditors (General/Creditor Assignment) requires highly trained—highly skilled—highly-credentialed—highly-experienced special assets and special situations transitional management, valuation, and disposition experts with decades of proven experience and unimpeachable credibility.
For over 40-years in hundreds of fiduciary assignments throughout the world, Equity Development Systems, Ltd., as assignee has judiciously guided and skillfully represented creditors, investors, and myriad other stakeholders in the disposition of their troubled accounts.
From National Priority List Superfund Sites—to a decommissioned nuclear-powered aircraft carrier—to the pencils-on-the-desk—we handle it all, and we have successfully managed and generated billions of dollars for our global clientele in the conversion of their distressed assets to cash. We specialize in handling the disposition of Environmentally-Sensitive and Impaired Real and Moveable Assets (Superfund and Brownfields Sites), Hospitality, Gaming, Resorts, Shipyards/Admiralty/Maritime, Aviation, Automotive (Manufacturing and Retail), Heavy Industrial, Oil & Gas/Minerals, High-Value Residential distressed assets and complex—highly-contentious special assets and situations. Our award-winning services have earned us the distinction of being the only Court-Appointed Receiver (Assignee) in the country that the United States Environmental Protection Agency (USEPA) allows to conduct such General Assignment services on active Superfund Sites. And, and we are pleased to serve as Keepers for the U.S. Marshals Service for federal court seizures of assets under admiralty jurisdiction. We are the measure by which all assignee-fiduciaries are judged.
The basic process in an Assignment for the Benefit of Creditors is that the business (Assignor) turns over its assets, both real and moveable, to an independent third-party neutral (Assignee [EDS]) who is the responsible fiduciary for divesting the assets and settling with creditors.
EDS marshals on-site 24/7/365 throughout the world to act as impartial fiduciaries in securing and operating troubled accounts facing operational or financial challenges. Our experts work diligently with all stakeholders to protect, maintain and enhance the going-concern value of the business and business assets that might otherwise be lost during bankruptcies, foreclosures, restructurings, and other actions while actively pursuing permanent solutions.
An Assignment for the Benefit of Creditors is a voluntary and arms-length transaction that provides a speedy, orderly disposition and equitable liquidation of the firm’s assets and subsequent distribution to its creditors. It is similar to a Chapter 7 liquidation process, but is far quicker and much less expensive and therefore generally derives a larger distribution to all creditors.
Assets Held in Trust: By operation of law, all assets are held in trust upon acceptance of the Assignment. These assets and the funds realized therefrom are protected against creditor claims. The assets are then liquidated and the proceeds, less administrative expenses, are distributed to all creditors according to their lawful priority class. The order of priority is very similar to that used by the Trustee in a bankruptcy proceeding.
Duties of the Assignee: The Assignee has similar duties to a Trustee in Bankruptcy. The Assignee is charged with acting in a business-like manner in the disposition of the assets. The Assignee has considerable flexibility in the methods used and does not have to obtain consent or have a hearing to ratify his or her actions.
Fees: Unlike Bankruptcy, no upfront fees are required. The fee amount is determined before the documents are signed and then become part of the General Assignment agreement. The fees for the Assignee are paid as an administrative expense from the proceeds recovered.
Advantages of a General Assignment: A General Assignment does not require court adjudication or consent in most states, nor does it require the consent of creditors. It does not have the stigma of bankruptcy and frequently benefits the company’s principals who nearly always guarantee lender obligations of the company. Because a General Assignment avoids the administrative procedures that govern bankruptcy there is a considerable reduction of the cost of disposition and the time necessary to sell the assets. The consequence is that there is greater flexibility in divestiture methods and options with resulting in greater returns for creditors. A General Assignment is an option that should always be considered as an option to bankruptcy.