David Reeder, an attorney with our Bankruptcy Business Restructuring and Creditors’ Rights department, made a presentation to the Provisors Lawyer’s Affinity Group on September 8, 2017 entitled “The ABCs of ABCs; Assignments for the Benefit of Creditors – A viable alternative to bankruptcy, sometimes.”

Assignments for the benefit of creditors (“ABCs”) are an increasingly popular out-of-court method of winding up businesses and selling the assets. 

Many players in the insolvency world view ABCs as a preferable alternative to a bankruptcy, under the right circumstances.

The biggest advantage is that the ABC process is presided over by a fiduciary, referred to as the assignee, who does not have to turn to a bankruptcy court for approval to make decisions regarding sales and other aspects.

Another advantage is that a company in a chapter 7 liquidation – and its creditors, if they are on board for the process – can “shop” for an assignee with industry expertise, instead of dealing with a trustee randomly assigned from a panel of trustees.

ABCs became widely popular in the tech downturn of the early 2000s, when managements of non-viable technology companies wanted to maximize the recovery for venture capital creditors so those VCs would be more prone invest in their next venture.  ABCs, because of their lower cost and fewer legal headaches, proved to be the liquidation method of choice for tech companies.

ABCs are now being used more than ever in business liquidations.

Valensi Rose’s Bankruptcy Business Restructuring and Creditors’ Rights department has represented assignees and creditors in ABC’s, and can advise regarding the advantages and disadvantages of an ABC.