Venture Capital Principals
Under California
law as well as in many other states, the directors
and officers of an insolvent corporation owe a fiduciary duty to
creditors. In particular those venture capital participants who have
chosen to be directors can be extremely vulnerable.
When the corporation becomes insolvent
this can create numerous conflicts between the fiduciary responsibilities
of a director and his/her creditor relationship with the corporation.
A General Assignment for the Benefit
of Creditors allows the investor to assign the corporation to a third
party trustee for liquidation or sale.
The benefits are
- Minimizes
or eliminates risk arising from fiduciary conflicts
- Often
produces greater recoveries for creditors and quicker sales of the insolvent
corporation
- Accomplished
without the disadvantages of court supervised bankruptcy proceedings
- Allows
the insolvent business to be sold without the publicity of bankruptcy
- Allows
the company to be sold free of unsecured debt
The Hamer Group
has experience in the
fiduciary duties and liabilities that arise out of lending relationships,
particularly in venture capital situations.
As
the assignee we have fiduciary responsibility which may help mitigate any
possible breach of duties directed at venture capital directors.
We can liquidate or
sell the corporation’s assets in an orderly and business-like way.
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