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Tampa Business & Commercial Law Blog

Buying assets from a company in Chapter 11 can be complex

When Florida companies are experiencing a period of financial distress, many turn to the Bankruptcy Court for protection from creditors and the opportunity to restructure the company in the hopes it will come out of bankruptcy in a better financial position. During Chapter 11 proceedings, assets may be sold in order to pay creditors. This process is not as simple as simply negotiating a buy/sell agreement.

Section 363 of the U.S. Bankruptcy Code governs the sale of assets during a Chapter 11. Therefore, a reference to a "363 sale" means that the assets being sold are from a company during bankruptcy. These sales must follow and comply with the Code, which includes the need for the Bankruptcy Court to approve them before they can be considered final.

Chapter 11 bankruptcy filed by Quirky, Inc.

In the excitement of creating something new, it can be easy to lose track of the financial aspect of inventing a product that is intended to be marketed. When this happens, some Florida businesses run into financial trouble and may need to file Chapter 11 bankruptcy in order to reorganize and obtain some breathing room from creditors. Quirky, Inc., a start up company that invented Wink, a smart home platform, recently filed for Chapter 11 due to the fact that it did not manage its finances adequately.

As part of the bankruptcy, Quirky is attempting to sell Wink. One of the company's largest creditors, Flextronics International, made an offer of $15 million to purchase the platform. However, Quirky is hoping for a better offer. Flextronics was one of many companies that provided the start up with an initial infusion of venture capital that came to approximately $175 million. In 2013, Quirky raised an additional $79 million.

Dispute resolution may be possible prior to foreclosure filing

The state of the economy over the last few years has made keeping some Florida businesses afloat a challenge. Meeting the company's financial obligations, including any mortgage liability, may be difficult. Before your lender files a foreclosure, it may be possible to come to a mutually agreeable outcome through alternative dispute resolution.

Waiting for your lender to file a foreclosure may not be in the best interests of the company. By the time that happens, your business could be in danger of closing forever. Most commercial lenders do not want to own your property, and they would rather you pay the mortgage debt.

Mergers and acquisitions are at record numbers

The global economy is still unstable, and there always seem to be rumors that some financial calamity is on the horizon. Even so, it may not surprise Florida readers who keep up with business news that announcements of mergers and acquisitions are made on a consistent basis. So far in 2015, it appears that a record amount of money is being spent in this area.

The recent announcement that Meredith is acquiring Media General for around $3 billion put the approximate value of mergers and acquisitions in the country at somewhere in the neighborhood of $1.503 trillion so far this year. This number has already surpassed the previous record, which was a total of $1.497 trillion for calendar year 1999. This year's number could go even higher considering the fact that there are still more than three months left in the year. 

Chapter 11 trustee challenges Relativity's bonus plan

When any company, including many here in Florida, files for Chapter 11 bankruptcy protection, the actions it takes are subject to the approval of the court and/or the trustee. Therefore, companies may not be able to take actions they believe would be beneficial to the company. For example, Relativity, a studio currently in Chapter 11 bankruptcy, wants to pay bonuses to certain employees, but the trustee objects.

The studio wants to pay the bonuses to approximately 80 employees who are not considered to be insiders, along with five others the studio says are key to the company's operations. Relativity says that paying the bonuses will provide an incentive to the employees to continue to work at their peak during the sales process. The company argues that these individuals have intimate knowledge of the studio's operations and should receive the bonuses so they will not leave the company.

Radio Shack says dispute resolution worked in gift card debacle

Many Florida consumers keep gift cards until they find something they really want or need. Some RadioShack customers held their gift cards too long and were unable to redeem them when the company filed for bankruptcy. One state decided to file a complaint against the retailer on behalf of those consumers, and other states joined in as well. A settlement was recently reached through an alternative method of dispute resolution, which kept the parties out of court.

The Bankruptcy Court, and the attorney generals of several states, will still need to approve the settlement. However, many of the people holding nearly $46 million in gift cards could receive either all or a portion of the value as a result. Reports indicate that priority will be given to consumers who purchased gift cards for themselves or others, and they could receive the full value of their cards, along with others who own cards under specific circumstances. People who received them in lieu of a cash refund or as the result of a dispute may only get a portion of the value back.

Company will use Chapter 11 to put restructuring plan into action

Oil and gas companies across the country have fallen on hard financial times since the cost of crude oil plummeted. Lower gas prices may be good for Florida consumers. However, companies such as KKR's Samson Resources are resorting to filing Chapter 11 bankruptcy in order to reorganize and stay in business. 

Samson Resources recently finalized its plan to restructure the company. The company's second lien holders will ultimately end up with control over the company. Cash payments of up to $485 million will reduce Samson's debts and give it the opportunity to become a viable company again.

Corporate restructuring could help turn a business around

Sometimes, it can be difficult for a Florida business owner to see the forest for the trees once a business begins to decline. Filing for bankruptcy protection does have its benefits, but it may not be the first or best solution for a company. Corporate restructuring could help turn the business around without involving the Bankruptcy Court.

Many creditors are willing to renegotiate existing agreements in lieu of writing off the debt. Knowing where to start, however, can be problematic. Involving a Florida attorney who is familiar with corporate reorganization is typically a smart choice.

Business litigation filed by company officers against partner

Many of Florida's small businesses are owned by a group of people who got together for a common goal. Each of them brings a certain skill set to the business, and the goal is to make the company successful. Sometimes, however, a member of the group fails to live up to his or her obligations to the company, which puts the business in jeopardy. If the conflict cannot be worked out amicably, the other members may file business litigation.

An out-of-state concrete company does projects on streets, highways and bridges, among other things. Two of the company's officers claim that they discovered that a third officer was embezzling from the business between April 2014 and June 2014. Allegedly, the officer's indiscretion was discovered in Dec. 2014.

Chapter 11 bankruptcy recently filed by A&P grocery company

As many Florida businesses know, a critical error in planning could prove disastrous for a company's success. This could be part of the reason why the A&P grocery company has filed for Chapter 11 bankruptcy for the second time in the last five years. At one time, it was the leading grocery company in the country.

Unfortunately, the company failed to adapt to the changing market place. Sources say that the company has failed to even update its look in order to appeal to today's consumers. Competitors were able to easily surpass the infamous grocery chain and grab some of its market share.

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