Middle market companies experiencing financial distress have tools at their disposal outside of formal bankruptcy. SulmeyerKupetz lawyers are adept at applying out-of-court solutions to insolvency issues when feasible, and our firm has for decades worked with businesses in Southern California and across the country to resolve debt, restructure or transition businesses, facilitate distressed transactions, and manage liquidations.
SulmeyerKupetz regularly represents businesses facing excessive debt or liquidity crises in negotiating agreements with creditors. This can involve drafting forbearance agreements to provide breathing space or moratoriums agreements suspending payments for a specified period of time, establishing new payment plans different from existing contract terms or judgments through restructuring agreements, abatement, and/or discounting or extending debt. The goal of these agreements is to preserve the value of a given business as a going concern in order to maintain operations and jobs, for the benefit of vendors and creditors, as well as the debtor.
An assignment for the benefit of creditors (ABC) is a business liquidation device available as an alter¬native to formal bankruptcy proceedings. In many instances, an ABC can be the most advantageous and graceful exit strategy. This is especially true where the goals are (1) to transfer the assets of the troubled business to an acquiring entity free of the unsecured debt incurred by the transferor and (2) to wind down the company in a manner designed to minimize negative publicity and potential liability for direc¬tors and management. The option of making an ABC is avail¬able on a state-by-state basis. Unlike a Chapter 7 liquidation, where an unknown trustee will generally be appointed to administer the liquidation process, the assignor in an ABC can select an assignee with appropriate experience and expertise to conduct the wind-down of its business and liquidation of its assets. In prepackaged ABCs, where an immediate going concern sale will be implemented, the assignee will be involved prior to the ABC going effective.
In some circumstances, the best option may be to conduct a liquidation out of court and without the need for an ABC. There are also cases where it may be determined that a consensual surrender of possession or other consensual arrangement should be entered into with a secured lender. In certain situations, there may be other solutions, such as a merger or divestiture, which can be used to address the problems facing a business.
Examples of the firm’s work in out-of-court solutions include: