Legal Question in Business Law in California

Re: How can I collect from a company that closed down?

I've read the previous three answers and maybe can add a little.

First, you didn't say, and perhaps don't know yet, whether the 'old' corporation has or will be dissolved or abandoned and a new one formed, on the one hand, or whether the old corporation will continue to operate with a formally-changed corporate name or under a DBA, on the other.

Your rights, remedies and proper course of action depend to some extent on how the metamorphosis is actually carried out.

In some ways, you're better off if they choose the former route. When a debtor corporation closes down and transfers its assets (whether by dividend, liquidating distribution, sale or assignment to another entity) whereby the insiders (shareholders, directors, officers) are paid or get value of any kind before the creditors, this is unlaful and a breach of a fiduciary duty by the individuals who cause the insiders to be preferred over outside creditors. To be completely fair, the holdings on this in California are not very uniform, but the cut-and-run insiders could be sued with likelihood of personal liability. This in NOT an alter ego theory; it has another name that I do not recall (I'm out of the office and can't look it up).

In addition, the wind-up of the old corporation may invoke California's Bulk Sale Act, Commercial Code sections 6101 to 6109, if I recall. Any acquirer of the assets of the old business MAY be liable to its creditors if the Act's provisions are not complied with, as they probably won't be.

If the old corporation simply changes its identity without the formality of creation of a new entity and transfer of assets to it, or out of the old, then your options are somewhat fewer and perhaps less likely to result in a judgment that can be enforced, i.e., a judgment on which the individuals are solely or jointly liable (with the corporation).

I would be pleased to look at further facts and give you a free opinion on those facts, if you'll forward them to me for review and comment.

Note that if your arrangements were based on an oral contract, the statute of limitations for initiating suit is two years from date of a breach, so you may need to act within he next couple of months to preserve all your rights.

Re: How can I collect from a company that closed down?

You do have some options. Legally, the company and its owners cannot simply evade its creditors by starting a new company and transferring all its assets to it. So long as you are able to gather the facts to prove their scheme, you can go to court and collect the money due you from the new company, and perhaps from the owners and managers. It looks like you might be dealing with people who are experienced in evading their creditors; I would strongly recommend getting a lawyer, or you are going to have a very difficult time defeating their plans. I specialize in these kinds of collections. Feel free to contact me if you would like to discuss this further.

Re: How can I collect from a company that closed down?

Collecting? Good luck.

If the company plays its card 'right', it can close and leave creditors holding the bag. If they file BK, then you can file a creditor's claim, which isn't likely to result in payment to you, but you need to do it on 'spec'. You might consider filing suit against both the old and new company's and the principles, on the hope that you can pierce the corporate veil and get to them, or on the hope that you can show fraud, or on the hope that they will settle rather than spend attorney fees. This is not going to be easy or free. It the amount owed is under $7500, file in Small Claims court. If a lot more than that, Superior Court through good counsel. Feel free to contact me if it needs to go to Superior court, and if it is in SoCal.

Re: How can I collect from a company that closed down?

If the company is simply 'closing' and reopening as a new business, same assets, same employees, same modus operandi, then we would probably recommend that you sue both entities (at a minimum) under what we call alter ego theory. You cannot do this in small claims court; a superior court lawsuit would be required.

Presumably, there is more than $25,000 at stake. If so, please feel free to call or email for additional assistance. We are judgment enforcement professionals, with attorneys and paralegals on staff, and we are very familiar with games that debtors play.

Good luck.

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