Assignment for the Benefit of Creditors

This week, I want to introduce you to Senator Sam Givhan’s SB15 (SB15-eng.pdf) the Uniform Assignment for Benefit of Creditors Act.

It is said that death is a part of life. The same can be said for Alabama businesses. We don’t like to think about the end of a business’ life, but sometimes circumstances dictate the need for an orderly wind-down, especially when there are creditors involved. Current law gives taxpayers two extreme options: an informal wind-down process that lacks order and protection for creditors, and an expensive, time-consuming bankruptcy through a Federal court. If passed, SB15 could be a quicker, less expensive, yet protective process for Alabama businesses and their creditors.

The idea is simple:

1. The business decides it cannot continue, engages a Firm to act as an independent fiduciary and transfers control of the business’ assets to the Firm.
2. The Firm takes control of the business’ bank accounts and assets, and acts in the best interests of the creditors to control the sale and wind-down of all assets.
3.  The Firm ceases all operations, takes a complete inventory, secures all assets and ceases all unnecessary spending.
4. The Firm send notification to all known creditors containing information like the name of the business being liquidated, the name of the Firm and a the process by which the creditor may submit a claim.
5. The Firm sells the assets in an orderly manner, focusing on maximizing value.
6. Creditor claims are reviewed and matched to the business’ accounting records
7. The Firm distributes the proceeds to creditors fairly based on legal priority rules.
8. The Firm prepares a final accounting of the proceeds and creditor payments, and closes the assignment.

I think it is obvious that that this Act creates an opportunity for CPA Firms to act in this capacity. In fact, this Act was created with CPAs in mind. As of this writing, SB15 has passed the Senate. We anticipate it will pass the House in the next couple of weeks.

And now, quick updates:

1. HB250 (Garrett) and its companion bill SB79 (Roberts), intended to clear the way for Trump accounts in Alabama and to provide an indefinite extension to a provision allowing employers to pay employee student loans as a tax-free benefit, have passed their respective committees (the bill has yet to clear either the House or Senate Floor, despite this report mistakenly saying it had last week).
2. SB227 (Elliott) creates the Office of Occupational and Professional Licensing within the Alabama Department of Workforce. This bill gives the Joint Sunset Committee an option to refer board management to an in-house staff to serve as the Executive Director, licensing, investigation, and other agents of those boards. This bill has passed the Senate. While ours is not a poorly managed board, we are concerned that this could lead to unintended consequences to our State Board’s management in the future without adequate guardrails.
3. HB220 (Pringle) would authorize the replacement of any state board member whom the Governor, Speaker or President Pro Tempore has appointing authority over. Our Alabama State Board’s members are all appointed by the Governor. While we are not aware of any reason why our board members would be currently threatened by this bill’s passage, we are not naïve to think this could not be a problem in future years. This bill has passed the House, and we will be monitoring this bill closely in the Senate.
4. In case you haven’t heard, the “Big-10” cities have dropped their lawsuit over SSUT. While they’ve conceded that particular battle, they vowed that the war will continue until SSUT reforms are achieved. Rep. Chris England has dropped a new bill (HB434) that would reallocate SSUT collections to direct less to the Education Trust Fund and more to the local schools themselves based on average daily membership. We’ll keep you updated.
5. The Watchlist on our Advocacy web page is being constantly updated. Check in often.

CLICK HERE FOR THE WATCHLIST

There have been 762 bills filed so far. If we’ve missed something or you have any questions, please do not hesitate to contact me at rpearson@alabama.cpa.