Opportunity for Liquidation, can original investors of a closed business come after me?

[egiblock]

Basically, Person “A” runs Company “A”

Company “A” had a handful of investors over the years to get the business going. Never saw any returns, and the Company “A” was closed when Person “A” filed for bankruptcy. The company itself didn’t file bankruptcy, it was just filed as a closed business due to the amount of personal debt that Person “A” had from constantly putting money into the failing company.

When closed, Company “A”, let’s say that there are about 10,000 items of inventory still available, sitting in a warehouse. I have been asked about liquidating the inventory for Person “A” and have been told that I can just keep the proceeds from the sales. Person "A" does not want any money from the proceeds.

Can the original investors of Company “A” come after me and the money that is made from selling off the inventory that exists?

 

[quincy]

What is the name of your state?

 

[LdiJ]

Basically, Person “A” runs Company “A”

Company “A” had a handful of investors over the years to get the business going. Never saw any returns, and the Company “A” was closed when Person “A” filed for bankruptcy. The company itself didn’t file bankruptcy, it was just filed as a closed business due to the amount of personal debt that Person “A” had from constantly putting money into the failing company.

When closed, Company “A”, let’s say that there are about 10,000 items of inventory still available, sitting in a warehouse. I have been asked about liquidating the inventory for Person “A” and have been told that I can just keep the proceeds from the sales. Person "A" does not want any money from the proceeds.

Can the original investors of Company “A” come after me and the money that is made from selling off the inventory that exists?

It totally depends on the agreements between company A and the investors.

 

[adjusterjack]

Can the original investors of Company “A” come after me and the money that is made from selling off the inventory that exists?

Can they? Sure. I suggest you don't open that potential can of worms without consulting an attorney. It's possible that A doesn't have the authority to give away that money. It's possible that the investors would have dibs on any money from the sale of the inventory. It's possible that you could end up spending tens of thousands defending a lawsuit by the investors. There are so many ways that it can go wrong.

 

[Taxing Matters]

Can the original investors of Company “A” come after me and the money that is made from selling off the inventory that exists?

It's more the creditors that might be a problem than investors. If any of the creditors has filed a UCC-1 financing statement securing the money owed them with the inventory then they have a lien on the inventory and any cash that would come from selling that inventory. So before you proceed here, check to see if any financing statement was filed listing inventory as a secured asset.

Apart from that, as to claims by investors it would also be important to know what kind of business entity this was (corporation, LLC, etc), how the investors invested in the business, and Person A's position in that company. Also, how much money are we talking about here?

 

[quincy]

And, to add to questions, is this business located in the US? If so, in what state?

 

[zddoodah]

it was just filed as a closed business

Not sure what this means.

Can the original investors of Company “A” come after me and the money that is made from selling off the inventory that exists?

Anyone can "come after" anyone. Whether the investors would have any valid claim depends on a lot of factors not mentioned in your post, including the nature of their investments and the terms of any contracts governing those investments.

It's more the creditors that might be a problem than investors.

Agree.

 

[quincy]

Curious: If Person A and/or Company A are located in the US, did Company A receive a PPP loan? Are the investors also shareholders?

 

[LdiJ]

Another issue I thought of is that the value of the inventory matters to a great extent. The fact that person A doesn't want any money from it makes me believe that getting it out of the warehouse is more important to person A than it's value (particularly if it is leased space). If it is 10,000 items worth a pittance each then liquidating it might only net the person a few hundred, or even a couple thousand, then it might not be worth the investors trying to claim the inventory.

If it is 10,000 pieces of more valuable inventory, then it makes no sense that person A would not be interested in trying to get money for the inventory.

 

[quincy]

Lots of unknowns.

Perhaps egiblock will return at some point in time to add information.