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Richard, Attorney
Category: Business Law
Satisfied Customers: 55716
Experience:  32 years of experience practicing law and a businessman.
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What happens to the statutory obligations (such as back pay

Customer Question

What happens to the statutory obligations (such as back pay and employee termination clauses) under such section 1002 when a corporation sells all its assets and has no funds to settle employee and vendor claims. Can they still sell the assets?
Submitted: 6 years ago.
Category: Business Law
Expert:  Richard replied 6 years ago.

Good afternoon. The corporation can sell assets, but the assets cannot be sold for less than fair market value so as to defraud creditors..both employees and other vendors. The sale of assets simply result in an exchange of assets for cash and doesn't reduce the corporation's net assets, and is likely to give the corporation more liquidity to enable it to pay some of these claims.



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Customer: replied 6 years ago.
The issue then is who determines fair market value and how is it determined if the corporation is selling off its subsidiary.
Expert:  Richard replied 6 years ago.
If a claim is brought by the employees or creditors to contest such sale on the grounds that the assets were sold at less than fair market value thereby depriving the employees and/or creditors of their claims, the court will make the ruling relying on independent third party appraisers.