When a company doesn’t have the money or enough funds to pay its creditors, the solution to their problem is to file for bankruptcy. Companies who end up in financial trouble will be forced to liquidate their assets to pay off their debts from creditors. Filing for bankruptcy is often the solution of choice for most companies, but it is not the only option that they have. Some companies find corporate dissolution the best solution to their financial problems. Some companies examine alternative solutions, such as a general assignment.
What Is a General Assignment?
A general assignment is an alternative to bankruptcy, and some companies find it a better option compared to bankruptcy. An assignment agreement involves two entities, namely, the assignor and the assignee. In a general assignment, the assignor is any company that transfers their legal rights, assets, and liabilities to a third party, known as the assignee. The assignee takes on all the legal rights and assets of the assignor to a specific property or company, including their liabilities. And one of these liabilities is the company’s debt to its creditors. The primary responsibilities of the assignee are liquidation of company assets, investigating or vetting on creditor claims, and issue creditors their dividend. Once all of the creditors’ claims are satisfied, the shareholders have a right to the remaining profit of the company.
How to Execute a General Assignment
It is essential to have basic knowledge of the mechanism of the general assignment. The information will help us understand the concept of the topic, especially those who are planning to do one.
1. Company Gets into Financial Trouble
Most companies would choose to liquidate their assets to pay their creditors. Another option is bankruptcy, general assignment, or corporate dissolution. If the company opts for a general assignment, then they’ll need to get into an assignment agreement with another party. The other party should be aware of the current financial status of the company, as well as the financial trouble they are in.
2. Transfer of Rights, Assets, and Liabilities
As mentioned, the assignee is a third party entity to whom the rights, assets, and liabilities of an assignor are transferred. An assignee could be an individual or another company that is willing to take on the responsibility of liquidating the assets and investigating the claims of each creditor.
4. Distribution of Profit to Creditors
Once all assets are liquidated, and the claims of each creditor are examined, the assignee pays or issues each creditor a dividend. Issuing dividends or paying debt is one of the primary responsibilities of the assignee. They see to it that the creditors’ claims are satisfied.
5. Distribution of Residual Claim
The remaining profit from the liquidated assets is given to the shareholders after all creditors have been paid.
10+ General Assignment Samples in PDF | DOC
1. General Assignment Sample
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5. General Assignment Reporter Sample
6. Bill of Sale and General Assignment Sample
7. General Assignment of Property Template
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11. General Assignment in DOC
Can I execute a general assignment?
Yes, you can. Almost anyone can execute a general assignment. That is because it does not require getting consent from creditors nor any intervention of the court. The catch is, the assignee or the entity to which one’s rights and liabilities are transferred to, will only accept a corporation or a partnership.
How does the ABC process work?
ABC is an acronym that stands for assignment for the benefit of creditors and is another term for general assignment. The assignor here voluntarily transacts with a creditor so that the firm’s assets can be quickly, orderly and fairly liquidated, and then fairly distributed to its creditors. The assignor and creditor take on active roles in the transaction until the agreement is fulfilled.
Why should I choose a general assignment and not a bankruptcy?
Companies who are experiencing financial trouble would choose a general assignment as an alternative to filing bankruptcy mainly because filing for bankruptcy is very costly, and it’s also a lengthy process. Bankruptcy requires a retainer upfront, a court approval, and notices sent when major decisions are made. If companies choose a general assignment, the process will be quicker, and payment for assignee fees will come from the proceeds. It’s also an advantageous process for creditors because they will get paid faster and recover their claims as soon as possible.
Do I need consent from creditors?
Creditor consent is not necessary if you opt for a general assignment. The one who decides on the actions to take is you or the company. Creditors don’t mind the way you acquire funds for payment as long as you get your debts paid.
Who has control over the proceedings?
From a legal standpoint, you as the assignor or principal does not have control over the proceedings once you choose to do a general assignment. However, the assignee may employ you to assist in the liquidation process.
How long does a general assignment process take?
It’s a case-by-case basis and is affected by the ability of the assignee to liquidate the assets quickly. The statutory period may take a couple of months, but not more than 12 months.
Nobody wants to be involved in any financial trouble, regardless if your a company or an individual. However, it doesn’t mean that learning about bankruptcy and general assignment is asking for financial problems. Always remember that knowledge is power and you should bank on that so that you won’t end up being ignorant on things. As for samples, you may view the ones provided above anytime you want. They’re downloadable and free!
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