According to this author, the most important factor that determines whether an acquisition from a financially challenged seller is a success or failure is the quality of the due diligence which is undertaken.
By Mr. Lawrence N. Dodyk & Mr. Edward Abahoonie & Ms. Sara DeSmith, CPA & Mr. Christopher G. Pisciotta
Two approaches to the sale of an entity’s assets are considered for tax purposes in bankruptcy proceedings: (1) a tax-free “reorganization,” or (2) certain appreciated assets may be transferred to creditors in satisfaction of their debts.
By Laurence M. Bambino, Esq. & Michael B. Shulman, Esq. & Laurence E. Crouch, Esq. & Ethan D. Harris, Esq.
In September 2015, the Treasury Department and the IRS issued final regulations that provide guidance with respect to the qualification of a transaction as a reorganization under Section 368(a)(1)(F) — an “F” reorganization. A typical F reorganization involves a corporation changing its domicile from one state to another state, whether effected by way of a merger or a conversion.
By Steven Epstein, Esq. & Arthur Fleischer, Jr., Esq. & Peter S. Golden, Esq. & Brian T. Mangino, Esq. & Philip Richter, Esq. & Robert C. Schwenkel, Esq. & John E. Sorkin, Esq. & Gail Weinstein, Esq.
In a follow-on decision to Quadrant Structured Products Co. v. Vertin, a Delaware court held that creditors bringing fiduciary claims against directors of an insolvent corporation do not need to establish that the corporation was either "continuously" or "irretrievably" insolvent, as long as it was insolvent when the challenged action was taken.
Distressed sellers have to consider if a transaction should be structured as a sale of company assets or sale of company stock. The choice of structure carries legal, accounting, and taxation implications.