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Take control & liquidate corp as sole shareholder?

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FrankJ

Junior Member
What is the name of your state? PA

Hopefully this is an appropriate forum for this question. As an individual, I loaned another individual some money. That other individual is the sole shareholder in a corporation and pledged/escrowed all of their shares as collateral. Well, the loan payments haven't been made and I'd like to go after the corporation's assets. I've retained an attorney and he is reviewing the loan documents, corporate papers, etc. Based on our initial discussion, I get the impression that indeed there is a way we could go after the corporation's assets, but we'd be jumping into a black hole. The corporation could have taken on additional debt, not paid its sales taxes, etc and in the end there may be no assets left over.

It will probably be a little while before my attorney gets back to me, and in the mean time I'd like to learn whatever I can about the possible approaches, potential gotchas, etc. Could anyone shed some light on this subject?

Learning the hard way,
Frank
 


divgradcurl

Senior Member
FrankJ said:
What is the name of your state? PA

Hopefully this is an appropriate forum for this question. As an individual, I loaned another individual some money. That other individual is the sole shareholder in a corporation and pledged/escrowed all of their shares as collateral. Well, the loan payments haven't been made and I'd like to go after the corporation's assets. I've retained an attorney and he is reviewing the loan documents, corporate papers, etc. Based on our initial discussion, I get the impression that indeed there is a way we could go after the corporation's assets, but we'd be jumping into a black hole. The corporation could have taken on additional debt, not paid its sales taxes, etc and in the end there may be no assets left over.

It will probably be a little while before my attorney gets back to me, and in the mean time I'd like to learn whatever I can about the possible approaches, potential gotchas, etc. Could anyone shed some light on this subject?

Learning the hard way,
Frank

Listen to your attorney, he has access to all of the relevant facts and documents and can provide you with a far more accurate answer to any question you might have than we can. The key problem you will face is that you are effectively a stockholder -- when a corporation dissolves, the assets of the corporation, if any, are distributed in a set manner. The laws are a bit different from state to state (although most follow Delaware laws more or less), but basically any secured debtors -- mortgages, leases, etc. -- get paid first, unsecured debtors come second, and the stockholders only get paid if there is anything lest after paying off ALL of the secured and unsecured debt of the corporation. Yes, you are a type of a secured creditor -- but since the shares of the corporation as dissolution cannot be valued until all of the other debtors have been paid off, you are effectively a stockholder, and therefore the last in line to receive anything from the dissolved corporation.

Your attorney can review all of the corporate records and help you determine if the best course of action is dissolution, or something else.
 

FrankJ

Junior Member
divgradcurl said:
Yes, you are a type of a secured creditor -- but since the shares of the corporation as dissolution cannot be valued until all of the other debtors have been paid off, you are effectively a stockholder, and therefore the last in line to receive anything from the dissolved corporation.

Your attorney can review all of the corporate records and help you determine if the best course of action is dissolution, or something else.
Thanks for the reply. If you or anyone else cares to shed more light on the subject, I wouldn't mind knowing more about what dissolution might involve and what other options there might be (assuming that becoming sole shareholder and exercising its privledges is all I have to work with).

At this point what I'm guessing is that I'd have to have all the shares turned over to me in some way. Then I might have to appoint a director and indirectly officers. Which could be me, but I know squat and then I might be taking on some risk. It could be someone else, but then that would be costing me $$. Somebody, though, would have to go through all the corporate books. Which could be nearly worthless if not mysteriously lost or burned. The processing of figuring out sales, taxes, bills, yadda could potentially take hundreds of hours for even a small restaurant like this, and there could be a tremendous amount of fudging/estimating. Oh, and after paying for all of the work, I may get nothing at the end of the day. Sound about right?

I have to ask... are there any backdoors here? I mean, could I install someone who then turns around and transfers or sells a corporate asset to me and then wipe my hands of the whole mess somehow? Or would that be illegal or something which would "pierce the corporate veil" and expose me to risk as a shareholder?
 

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