Distributions After Insolvency
Helping You Navigate Complex Insolvent Business Distributions
When a company faces insolvency, the distribution of its remaining assets becomes a critical and complex process. Distributions after insolvency must adhere to legal requirements and prioritize creditors’ claims while safeguarding the rights of shareholders and other stakeholders. At Isenberg & Hewitt, we offer expert legal guidance to navigate the intricacies of post-insolvency distributions, ensuring compliance with the law and protection of your interests.
What Is Insolvency?
Insolvency occurs when a company can no longer meet its financial obligations as they become due. It can also happen when its liabilities exceed its assets. This financial state triggers specific legal processes and obligations, including the distribution of any remaining assets to satisfy creditors and other claimants. Proper handling of these distributions is essential to avoid legal disputes and potential liabilities.
Legal Considerations in Distributions After Insolvency
- Fraudulent Transfers: It is illegal to make distributions that intentionally defraud creditors. Transfers made shortly before insolvency or during the insolvency process are often scrutinized and may be deemed fraudulent.
- Fiduciary Duties: Directors and officers of an insolvent company have a fiduciary duty to act in the best interests of the company’s creditors. Any distributions must be made with these duties in mind, as improper distributions can lead to personal liability for those involved.
- Priority of Claims: Insolvency law dictates the order in which creditors and claimants are paid. Secured creditors typically have priority over unsecured creditors, and equity holders are usually last in line. Understanding and adhering to these priorities is crucial to avoiding legal challenges.
- Voidable Preferences: Payments made to certain creditors shortly before the insolvency filing may be considered preferential and subject to reversal if they unfairly benefit one creditor over others.
Common Challenges in Post-Insolvency Distributions
- Asset Valuation Issues: Proper valuation of the company’s remaining assets is critical to ensure fair and equitable distribution, but it can be complex and contentious.
- Disputes Among Creditors: Conflicts may arise over the priority of claims, especially when there are competing interests among creditors.
- Litigation Risk: Improper handling of distributions, like making payments to insiders or failing to adhere to priority rules, can lead to litigation and liability for those in charge of the distributions.
Our Approach
The expert attorneys and support staff at Isenberg & Hewitt provide comprehensive legal support throughout the post-insolvency distribution process. With a focus on minimizing risk and resolving disputes, we work closely with companies, creditors, and stakeholders to ensure that distributions are conducted in compliance with the law.
Contact Us
If your company is facing insolvency, contact Isenberg & Hewitt today. Schedule a consultation with one of our experienced attorneys to discuss your situation and explore your legal options.