Legal Question in Civil Litigation in California

Hello,

Our company, a California located LLC start up, is considering filing for bankruptcy. The founder has patents under his name for the products the company sells; it is in our legal agreements that those products will only be sold by this company as it was required by the investors. The sales have been rising steadily however there are too many payables for the company to deal with. Devices are marketable though and we consider filing for bankruptcy with this company and starting a new company that would sell the same products.

What would be the legal implications of such a decision for the company and the founder himself? We can't continue the way it is and at the same time we just can't lose 10 years of work put into developing the products. Most of the work has been done by the founder years before the company started operations and he is also the biggest interest holder in the company.

We consider having our second largest investor, located abroad, forming such a new company, in which case we would become the sole distributor of the products. We could incorporate abroad if we found that helpful.

I am posting this question under civil litigation law which I hope is correct.

We would appreciate your insight.

Thank you for your assistance.


Asked on 6/29/11, 1:32 pm

1 Answer from Attorneys

It sounds as if the exclusive right to manufacture and sell these products is the main asset of the LLC. If so, you are going to face the trustee and creditors expectation that those rights will stay in the bankruptcy estate of the company. It is possible depending on your debt structure, that a new company could purchase all the assets of the existing LLC to get those rights, but you would have to get the approval of the creditors committee and the trustee, and you would have to figure out how to fund that acquisition by the new company. Another better option may be Chapter 13 reorganization. That would allow the existing company to go forward with new payment arrangements and possibly elimination of some of the unsecured debt. You should contact a bankruptcy firm in your area.

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Answered on 6/29/11, 2:14 pm


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