AN ACT TO AMEND TITLE 10 AND TITLE 30 OF THE DELAWARE CODE RELATING TO THE UNIFORM ASSIGNMENT FOR BENEFIT OF CREDITORS ACT.

Legislation Document

SPONSOR:

Sen. Brown & Rep. Griffith

Rep. Harris

DELAWARE STATE SENATE

153rd GENERAL ASSEMBLY

SENATE BILL NO. 267

AN ACT TO AMEND TITLE 10 AND TITLE 30 OF THE DELAWARE CODE RELATING TO THE UNIFORM ASSIGNMENT FOR BENEFIT OF CREDITORS ACT.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:

Section 1. Amend Part IV, Title 10 of the Delaware Code by making deletions as shown by strike through and insertions as shown by underline as follows:

Chapter 73

A. Uniform Assignment for Benefit of Creditors Act.

§ 7301A. Title.

This chapter may be cited as the Uniform Assignment for Benefit of Creditors Act.

§ 7302A. Definitions.

In this chapter

(1) “Affiliate” means:

a. A person that directly or indirectly owns, controls, or holds, with power to vote, 20% or more of the outstanding voting interests of another person, other than a person that holds the interests:

1. In a fiduciary or agency capacity without sole discretionary power to vote the interests; or

2. Solely to secure a debt, if the person has not in fact exercised the power to vote;

b. A person with 20% or more of the person’s outstanding voting interests directly or indirectly owned, controlled, or held, with power to vote, by another person;

c. A person whose business is operated under a lease or operating agreement by another person, or a person substantially all of whose assets are controlled by the other person; or

d. A person that operates the business or substantially all the assets of another person under a lease or operating agreement.

(2) “Asset” means a legal or equitable interest in property of an assignor, regardless of the person holding or in possession, custody, or control of the property or where the property is located. The term does not include:

a. A legal or equitable interest in property restricted from assignment if the restriction is effective under other law, unless the other law permits assignment with the consent of another person and the person consents to the assignment in a manner permitted by the other law; or

b. If the assignor is an individual, a legal or equitable interest in property to the extent it is exempt from legal process under other law.

(3) “Assigned asset” means an asset transferred under an assignment.

(4) “Assignee” means a person to which assets are transferred under an assignment.

(5) “Assignment” means a transfer by a person of all the person’s assets to another person for the benefit of the transferor’s creditors.

(6) “Assignment agreement” means an agreement that transfers or provides for a transfer of all the assignor’s assets.

(7) “Assignment estate” means the assets held at a given time by the assignee under an assignment.

(8) “Assignor” means a person whose assets are transferred under an assignment.

(9) “Claim” means a creditor’s right to payment or to an equitable remedy, regardless of whether the right is reduced to judgement, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, legal, equitable, secured, or unsecured.

(10) “Cohabitant” means each of 2 individuals not married to each other who live together as a couple after each has reached the age of majority or been emancipated.

(11) “Creditor” means a person that has a claim against an assigned asset or the assignor.

(12) “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.

(13) “Good faith” means honesty in fact and the observance of reasonable commercial standards of fair dealing.

(14) “Insider” includes:

a. In the case of an individual:

1. A relative of the individual;

2.A partnership or limited liability company in which the individual is a general partner or managing member; or

3. An organization of which the individual is a director, officer, or person in control;

b. In the case of an organization:

1. A director, officer, manager, or other person in control of or with controlling equity interest in the organization;

2. In a partnership or limited liability company in which the organization is a general partner or managing member;

3. A general partner or managing member of the organization; or

4. A relative of a general partner, managing member, director, officer, manager, or other person in control of or with controlling equity interest in the organization;

c. An affiliate; or

d. A managing agent of an organization.

(15) “Lien” means an interest in an asset that secures payment or performance of an obligation.

(16) “Organization” means a person other than an individual.

(17) “Perfected lien” means a lien on:

a. Real property other than fixtures on which a bona fide purchaser of the property cannot acquire an interest superior to the interest of the lienholder; or

b. Fixtures or property other than real property on which a creditor cannot acquire a lien by attachment, levy, or the like that is superior to the interest of the lienholder.

(18) “Person” means an individual, corporation, business trust, statutory trust, estate, trust, partnership, limited liability company, association, joint venture, government or governmental subdivision, agency, or instrumentality, or any other legal or commercial entity. The term includes a protected, registered, or other series, however denominated, of any of the foregoing persons if the series is established under law that limits, or limits if conditions specified under law are satisfied, the ability of a creditor of the foregoing persons or of any other series of the foregoing persons to satisfy a claim from assets of the series.

(19) “Proof of claim” means a record a creditor submits to an assignee to evidence the creditor’s claim.

(20) “Record” means information:

a. Inscribed on a tangible medium; or

b. Stored in an electronic or other medium and retrievable in perceivable form.

(21) “Relative” means an individual related by affinity or consanguinity within the third degree or a cohabitant.

(22) “Security interest” means a lien created by an agreement.

(23) “Send”, in connection with a record or notification, means:

a. To deposit in the mail, deliver for transmission, or transmit by any other usual means of communication, with postage or cost of transmission provided for, addressed to any address reasonable under the circumstances; or

b. To cause the record or notification to be received within the time it would have been received if properly sent under paragraph (23)a. of this section.

(24) “Sign” means, with present intent to authenticate or adopt a record:

a. Execute or adopt a tangible symbol; or

b. Attach to or logically associate with the record an electronic symbol, sound, or process.

(25) “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any other territory or possession subject to the jurisdiction of the United States. The term includes a federally recognized Indian tribe.

(26) “Transfer” means disposing of or parting with an asset or with an interest in an asset, regardless of whether the disposition or parting is indirect, conditional, or involuntary.

§ 7303A. Scope.

(a) This chapter applies to an assignment made by an assignor that is:

(1) An organization whose principal place of business is in this State;

(2) An organization whose internal affairs are governed by other law of this State;

(3) An individual whose principal residence is in this State;

(4) An organization wholly owned, directly or indirectly, by an assignor that satisfies paragraph (a)(1), (a)(2), or (a)(3) of this section; or

(5) An organization that:

a. Is partly owned, directly or indirectly, and controlled by an assignor that satisfies paragraph (a)(1), (a)(2), or (a)(3) of this section;

b. Has no place of business or employees; and

c. Relies on the services the organization receives from an assignor that satisfies paragraph (a)(1), (a)(2), or (a)(3) of this section.

(b) Notwithstanding another provision of this chapter to the contrary, a bank, as “bank” is defined in § 101 of Title 5, or an insurer, as “insurer” is defined in § 5901 of Title 18, may not be an assignor under this chapter.

§ 7304A. Requirements for assignee and assignment agreement.

(a) An assignee must be a person that:

(1) Is not a creditor, affiliate, or insider of the assignor;

(2) Is not an affiliate or insider of a creditor of the assignor;

(3) Does not have a claim against the assignment estate, other than a claim for fees and expenses to be paid under the assignment agreement;

(4) Does not have a material financial interest in the outcome of the assignment, other than a claim for fees and expenses to be paid under the assignment agreement;

(5) Does not hold an equity interest in the assignor other than a noncontrolling interest in a publicly traded company; and

(6) Is not an affiliate of a person that fails to satisfy paragraph (a)(1), (a)(2), (a)(3), (a)(4), or (a)(5) of this section.

(b) A person that satisfies subsection (a) of this section is not precluded from being an assignee merely because the person performed services for the assignor before the assignment.

(c) An assignment agreement must be in a record signed by the assignor and the assignee.

The record must:

(1) State the name and address of the assignor and of the assignee;

(2) Transfer or provide for a transfer of all the assignor’s assets;

(3) Describe the assigned assets in sufficient detail to identify the assets;

(4) Provide for the distribution of the assignment estate;

(5) Describe the fees to be charged by the assignee in connection with the assignment, including the basis on which they are to be calculated; and

(6) Include a representation by the assignor, under penalty of perjury, that the assignor is assigning all the assignor’s assets.

(d) If an assignee relies in good faith on the assignor’s representation made under paragraph (c)(6) of this section, all the assignor’s assets are deemed to be assigned, even if the representation is inaccurate.

§ 7305A. Effect of assignment; when assignment agreement effective.

(a) An assignee obtains the rights, title, and interests of the assignor in the assigned assets.

(b) If the assignor is an organization, an assignee obtains the rights, title, and interests of the assignor in assets acquired after the assignment.

(c) Except as provided in § 7310A(b)(12) of this title, an assignee takes each assigned asset subject to an existing interest in the asset held by another person.

(d) An assignee holds the assigned assets subject to the assignee’s duties under § 7309A of this title.

(e) An assignment is subject to other law under which the assignment may be fraudulent or otherwise voidable.

(f) The effective date of an assignment agreement is the date the agreement is signed by the last party to the agreement that is required to sign the agreement unless a later date is identified in the agreement as the effective date.

§ 7306A. Filing, recording, and title transfer requirements.

(a) In this section, “financing statement” has the meaning in § 9-102(a)(39) of Title 6.

(b) An assignee of a legal or equitable interest in personal property may file a financing statement in the filing office of:

(1) This State established for purposes of § 9-501(a)(2) of Title 6;

(2) Any other state in which:

a. The assignor would be located under § 9-307 of Title 6 if the assignor were a debtor for the purpose of that section; or

b. An asset of the assignment estate may be located.

(c) A financing statement filed under subsection (b) of this section must indicate that it is filed in connection with an assignment.

(d) When filing a financing statement under subsection (b) of this section, the assignee must:

(1) Attach a copy of the assignment agreement to the financing statement; or

(2) State on the financing statement that a copy of the assignment agreement is available on request to the assignee.

(e) A financing statement filed under subsection (b) of this section may:

(1) Designate the assignor as “debtor” and the assignee as “secured party”; or

(2) Use the terms “assignor” and “assignee” or words of similar import.

(f) The filing of a financing statement under subsection (b) of this section is not itself a factor in determining whether an asset secures an obligation. The rights of the assignee under the assignment are not affected if the assignee does not file a financing statement under a subsection (b) of this section.

(g) An assignee of a legal or equitable interest in real property shall record the assignment of the interest or notice of the assignment under the real estate recording law of the jurisdiction where the property is located.

(h) An assignee shall comply with other law governing the transfer of title to an asset.

(i) By signing an assignment agreement, the assignor authorizes the assignee to take the actions authorized by this section.

§ 7307A. Notification to creditors.

(a) Unless a creditor waives in a signed record the right to notification, an assignee shall send a notification of the assignment to each creditor known to the assignee, including those holding disputed, contingent, or unliquidated claims, individuals employed by the assignor within 90 days of the assignment, and contract counterparties, within a reasonable time not to exceed 30 days after the effective date of the assignment agreement.

(b) The notification must:

(1) Be in a record signed by the assignee;

(2) Include the assignee’s name, address, and other contact information reasonably necessary to communicate with the assignee;

(3) Provide reasonable instructions for submitting a proof of claim using the method established by the assignee under § 7309A(b)(5) of this title; and

(4) Identify the date established under § 7309A(b)(6) of this title by which each creditor whose claim is not otherwise allowed without a timely proof of claim under this chapter must submit a proof of claim.

(c) An assignee shall use reasonable means to provide the information in subsection (b) of this section to unknown creditors, including by any means the assignor regularly used to:

(1) Provide information to the assignor’s creditors; or

(2) Communicate information about the assignor, other than advertising, to the public.

§ 7308A. Duties of assignor.

(a) Subject to § 7323A of this title, an assignor has a duty to take all reasonable actions necessary for the assignee to administer the assignment, the assigned assets, and the assignment estate.

(b) In furtherance of the duty under subsection (a) of this section, the assignor shall:

(1) Preserve and turn over to the assignee the assigned assets in the assignor’s possession or control;

(2) Provide to the assignee information reasonably necessary to administer the assignment, the assigned assets, and the assignment estate;

(3) Sign any record reasonably necessary to transfer an assigned asset and comply with any notarization required under other law;

(4) Designate, and provide the assignee with the name, address, and other contact information reasonably necessary to communicate with, an appropriate person willing and able to act as a representative on behalf of the assignor as may be reasonably necessary to administer the assignment, the assigned assets, and the assignment estate;

(5) If the assignment includes a legal or equitable interest in real property or titled personal property, cooperate with the assignee in taking actions under § 7306A of this title;

(6) On or as soon as practicable after the effective date of the assignment agreement, provide the assignee:

a. A list of all assets;

b. A list of all the assignor’s employees, including those whose employment is terminated in connection with the assignment; and

c. A list of all the assignor’s known creditors, including, for each creditor, the creditor’s address and other contact information reasonably necessary to communicate with the creditor;

(7) Verify under penalty of perjury the accuracy of the lists required under paragraph (b)(6) of this section;

(8) With respect to a legal or equitable interest in property restricted from assignment, cooperate with the assignee to obtain consent from a person whose consent to assign the interest is necessary under other law; and

(9) Provide assistance to the assignee as required by the assignment agreement.

(c) The duties in this section also apply to a representative designated under paragraph (b)(4) of this section.

§ 7309A. Duties of assignee.

(a) Subject to § 7323A of this title, an assignee has a fiduciary duty to the assignment estate for the benefit of creditors:

(1) Of loyalty, including the duty to manage the assignment in good faith;

(2) To use reasonable care to maximize distributions under § 7315A of this title; and

(3) To wind up the assignment under § 7319A of this title in a manner compatible with the best interests of the assignment estate and creditors.

(b) Without limitation on the duties under subsection (a) of this section, and subject to § 7323A of this title, the assignee also has a duty to:

(1) Maintain a separate deposit account for funds related to the assignment;

(2) Collect on or dispose of each assigned asset, unless the assignee determines it is more economically efficient to abandon the asset;

(3) Prepare and retain appropriate business records, including a record of each receipt, disbursement, and collection on or disposition of an assigned asset;

(4) Pay administrative expenses of the assignment estate, to the extent the assignment estate has sufficient unencumbered assets;

(5) Establish a method that is reasonably designed to permit a creditor to submit a proof of claim;

(6) Establish a single date by which creditors whose claims are not otherwise allowed without timely proofs of claim under this chapter must submit proofs of claim, which must be not less than 90 days after the effective date of the assignment agreement;

(7) Unless a claim would receive minimal or no distribution without regard to the claim’s validity or asserted priority, examine the validity and priority of claims against the assignment estate and, if necessary, consult with the representative designated by the assignor under § 7308A(b)(4) of this title;

(8) At times set by the Rules of the Court of Chancery or order of the Court, provide to each known creditor a summary of the assets, liabilities, and expenses of the assignment estate;

(9) Comply with all requirements of the Internal Revenue Service and state and local taxing authorities;

(10) Send a notification to each known creditor of the assignee’s compensation and any change in the method of determining the assignee’s compensation from the method provided in the assignment agreement;

(11) Send a final accounting under § 7319A(a) of this title; and

(12) Comply with the other requirements imposed on the assignee under this chapter.

§ 7310A. Powers of assignee.

(a) An assignee has the powers necessary or appropriate to perform the assignee’s duties.

(b) Unless the assignment agreement expressly provides otherwise, the assignee has power to:

(1) Operate an existing business that uses an assigned asset, including preservation of the asset and collection on, or the sale, lease, license, or other disposition of, the asset;

(2) Incur secured or unsecured debt and pay expenses incidental to the exercise of the power under paragraph (b)(1) of this section;

(3) Assert a right, claim, cause of action, or defense the assignor could have asserted that relates to the assignment estate;

(4) Engage professionals, including a professional previously engaged by the assignor, to give advice, to prosecute or defend litigation, or for other purposes as the assignee considers appropriate, and pay professionals reasonable fees for services from the assignment estate;

(5) Collect on, or sell, lease, license, or otherwise dispose of, an asset of the assignment estate regardless of whether the asset is subject to a lien or other encumbrance;

(6) Exercise a right to redeem an asset of the assignment estate that is subject to a mortgage, deed of trust, security interest, or other encumbrance;

(7) Settle a matter involving a debtor of the assignor;

(8) Prosecute or defend a litigation pending on the effective date of the assignment agreement in favor of or against the assignor in the manner and with the same effect as the assignor could have done if the assignment had not been made;

(9) Recover an asset in the manner and with the same effect as the assignor could have done if the assignment had not been made;

(10) Settle claims against the assignment estate;

(11) Abandon an assigned asset;

(12) Subject to subsections (c) and (e) of this section, avoid a transfer or the incurrence of an obligation which a creditor that has filed a proof of claim could have avoided under other law if the assignment had not been made; and

(13) Invest funds, subject to applicable prudent investor standards under other law.

(c) The power under paragraph (b)(12) of this section is exclusive to the assignee with respect to a creditor that submits a proof of claim. A recovery by the assignee in the exercise of this power must be for the benefit of the assignment estate but may not exceed the amount, asset, or other value the creditor could have obtained by the avoidance.

(d) For the purpose of exercising the assignee’s power under paragraph (b)(12) of this section, exercising a voidable-transaction remedy, or otherwise establishing the priority of the assignee’s interest, an assignee has a lien on the assignment estate and the status of:

(1) A lien creditor under § 9-102(a)(52)(B) of Title 6 as to an asset that is a legal or equitable interest in personal property or fixtures;

(2) A bona fide purchaser under subchapter III of Chapter 1 of Title 25 as to an asset that is a legal or equitable interest in real property, other than fixtures, located in this State; and

(3) A bona fide purchaser under the law of another state as to an asset that is a legal or equitable interest in real property, other than fixtures, located in the other state.

(e) An assignee’s power under paragraph (b)(12) of this section to avoid a transfer made before the effective date of the assignment agreement, under or in connection with a swap agreement, securities contract, commodity contract, forward contract, repurchase agreement, or master netting agreement, is limited to the extent a trustee would not have the power to avoid the transfer under the Bankruptcy Code, 11 U.S.C. § 101 et seq.

(f) An assignee shall exercise the powers under this section consistent with the assignee’s fiduciary duty under § 7309A(a) of this title.

§ 7311A. Allowed claim.

(a) An assignee shall allow a creditor’s claim if:

(1) The creditor submits a proof of claim in compliance with § 7313A of this title; and

(2) The assignee does not dispute the claim under § 7312A of this title before final distribution.

(b) An assignee may:

(1) Allow a claim, pay a known liquidated claim, or accept a notice to the assignee of a claim received by the date established by the assignee under § 7309A(b)(6) of this title even if the creditor does not submit a proof of claim; or

(2) Allow and pay a claim evidenced by a late-filed proof of claim, if the assignee determines there is a reasonable basis for excusing the late filing.

(c) Any unsecured portion of an allowed claim shall be valued as of the effective date of the assignment agreement.

(d) A creditor’s claim is allowed if the creditor succeeds in a dispute under § 7312A(b) of this title.

(e) Subject to subsection (f) of this section, after expiration of the time for submitting a proof of claim, the assignee shall create a complete list of creditors that have submitted a proof of claim in compliance with § 7313A of this title. For each creditor’s claim, the list must state:

(1) The amount of the claim, if the amount is known to the assignee; and

(2) Whether the claim is secured or unsecured and, if secured, describe the collateral for the claim.

(f) If a class of creditors will receive no distribution on account of allowed claims, the assignee shall send a notice in a record to each creditor in that class that the creditor will receive no distribution instead of the list required in subsection (e) of this section.

(g) If requested by a creditor or other party with an interest in the assignment estate, the assignee shall provide the list created under subsection (e) of this section to the person making the request to the extent permitted by privacy laws and subject to any privacy safeguards the assignee determines in the assignee’s business judgment are reasonably necessary.

§ 7312A. Disputed and disallowed claims.

(a) An assignee may dispute a creditor’s claim before final distribution by sending notification in a record stating the nature of the assignee’s dispute to the creditor.

(b)(1) The assignee may commence a proceeding under § 7321A of this title objecting to the creditor’s claim, in whole or part.

(2) The assignee must commence any proceeding under paragraph (b)(1) of this section before final distribution under § 7315A of this title. If the proceeding is not filed before final distribution, the assignee shall allow the claim under § 7311A of this title.

(c) An assignee shall create a dollar-for-dollar reserve for the estimated amount of the potential distribution on a disputed

claim and may seek the Court of Chancery’s approval of the estimated amount of the claim in accordance with § 7321A of this title.

(d) Subject to subsection (b) of this title, an assignee shall disallow a claim for reimbursement or contribution of a person that is liable with the assignor on, or that has secured, the claim, to the extent:

(1) The claim against the assignment estate is disallowed;

(2) The claim for reimbursement or contribution is contingent as of the time of allowance or disallowance; or

(3) The person asserts a right of subrogation to the rights of a creditor.

(e) A claim for reimbursement or contribution of a person liable with the assignor on, or that has secured, the claim that becomes fixed after the effective date of the assignment agreement shall be determined, and shall be allowed or disallowed, subject to subsection (b) of this section, as if the claim had become fixed before the effective date of the assignment agreement.

(f) An assignee may reconsider the assignee’s decision to allow or disallow a claim for cause. If a reconsidered claim is allowed under § 7311A of this title, before the assignee makes additional payments or transfers to other creditors that are equal or junior in priority under § 7315A of this title to the reconsidered claim, the creditor with the reconsidered claim shall receive a payment or transfer in an amount proportionate in value to the payments or transfers already received by the other creditors. This subsection does not modify the assignee’s right under other law to recover from a creditor an excess payment or transfer made to the creditor. If a reconsidered claim is disallowed, the assignee shall comply with subsections (b) and (c) of this section.

§ 7313A. Proof of claim.

(a) A proof of claim must:

(1) State the name, address, and other contact information reasonably necessary to communicate with the creditor;

(2) State the amount of the claim;

(3) Briefly state the nature of the claim;

(4) Identify any asset of the assignment estate securing the claim;

(5) Be signed by the creditor under penalty of perjury;

(6) Include a copy of a record, if any, on which the claim is based;

(7) Be submitted using the method established under § 7309A(b)(5) of this title; and

(8) Be submitted by the date established by the assignee under § 7309A(b)(6) of this title.

(b) A proof of claim submitted in compliance with this section is prima facie evidence of the validity and amount of the claim.

(c) The submission by a creditor of a proof of claim in compliance with this section constitutes the creditor’s:

(1) Consent to the jurisdiction of the Court of Chancery under § 7321A of this title; and

(2) Assignment to the assignee of any right of the creditor to bring a voidable transaction action relating to the creditor’s claim.

§ 7314A. Rights of transferees.

(a) An assignee’s disposition of an asset:

(1) Transfers to a transferee for value all of the assignee’s rights in the asset;

(2) Discharges the assignee’s lien and, to the extent the assignment created a security interest in favor of the assignee, the assignee’s security interest; and

(3) Discharges any subordinate security interest or other lien subordinate to the assignee’s lien.

(b) A transferee that acts in good faith takes free of the rights and interests described in subsection (a) of this section, even if the assignee fails to comply with this chapter or the requirements of a judicial proceeding.

(c) If a transferee does not take free of the rights and interests described in subsection (a) of this section, the transferee takes the asset subject to:

(1) The assignee’s rights in the assets of the assignment estate;

(2) The assignee’s lien and, if applicable, security interest; and

(3) Any other security interest or other lien.

(d) Unless otherwise provided in a record, any warranty arising by operation of other law is disclaimed to the extent permitted by other law.

(e) If a subordinate security interest or other lien is discharged under this section, the assignee may file a record with the official or office responsible for maintaining an official filing, recording, registration, or certificate-of-title system covering the asset secured by the security interest or other lien. The record must state that the security interest or other lien is discharged as a subordinate security interest or other lien in connection with a disposition under an assignment for the benefit of creditors of the assignor whose asset is subject to the security interest or other lien.

§ 7315A. Distributions.

(a) In this section, “protected secured creditor” means a secured creditor whose lien:

(1) Is a perfected lien;

(2) Cannot be avoided by the assignee under § 7310A(b)(12) of this title; and

(3) Is not subordinate to the assignee’s lien.

(b) Except as provided in § 7316A of this title, the assignee shall pay claims from the assignment estate allowed under § 7311A of this title in the order of priority stated in this section.

(c) Unless otherwise agreed between the assignee and a protected secured creditor, before distributions under subsections (d), (e), (f), and (g) of this section, and in accordance with the priorities of creditors with liens under other law, the protected secured creditor shall receive the asset or the proceeds from the collection on or disposition of the asset to the extent of the value of the protected secured creditor’s interest in the asset, less the assignee’s reasonable and necessary expenses of preserving or disposing of the asset to the extent the expenses benefit the protected secured creditor and are incurred with the protected secured creditor’s consent or acquiescence. The protected secured creditor has an unsecured claim under paragraph (g)(2) of this section for the amount of the claim that remains after deducting the amount or value of an asset the protected secured creditor receives under this subsection. To the extent a claim is secured by an asset the value of which, after the deductions provided under this subsection, is greater than the amount of the claim, the protected secured creditor may receive interest on the claim and any reasonable fees, costs, or charges provided for under the agreement or other law under which the claim arose.

(d) After the distributions under subsection (c) of this section, the assignee shall pay the necessary costs of the administration of the assignment estate. The costs include:

(1) Fees and reimbursements of the expenses of the assignee and any professionals engaged by the assignee;

(2) Post-assignment taxes incurred by the assignee;

(3) Post-assignment rent incurred by the assignee in occupying premises on which assets of the assignment estate are located or the business of the assignor is conducted;

(4) Post-assignment lease payments incurred by the assignee in renting personal property used in the business of the assignor; and

(5) Amounts required to be paid under the assignment agreement for expenses of winding up the assignment under § 7319A of this title.

(e) After the distributions under subsections (c) and (d) of this section, the assignee shall pay claims entitled to priority under federal law including under 31 U.S.C. § 3713 from the assignment estate.

(f) After the distributions under subsections (c), (d), and (e) of this section, the assignee shall pay claims from the assignment estate for wages, salaries, or commissions earned not more than 180 days before the earlier of the effective date of the assignment agreement or the cessation of the assignor’s business. Payment shall be limited to the greater of:

(1) The amount of the claim allowed as a priority claim ahead of claims of other unsecured creditors under the Bankruptcy Code, 11 U.S.C. § 101 et seq.; or

(2) The amount allowed as a priority claim ahead of claims of other unsecured creditors under applicable non-bankruptcy law.

(g) After the distributions under subsections (c), (d), (e), and (f) of this section, each creditor shall receive a distribution of the assets of the assignment estate in the following order of priority:

(1) Unsecured claims entitled to priority ahead of claims of other unsecured creditors under other law; and

(2) Unsecured claims not entitled to priority.

(h) If the assets available for distribution to claims with equal priority under subsection (g) of this section are insufficient to pay the total amount of the claims with that priority, each creditor with a claim with that priority shall receive a pro rata distribution of the available assets based on the proportion the amount of the creditor’s claim bears to the total amount of the claims with that priority.

(i) If the claims entitled to the distribution under subsections (c), (d), (e), (f), and (g) of this section are paid in full, the residue shall be distributed to allowed claims evidenced by a late-filed proof of claim, other than a late-filed claim allowed by the assignee under § 7311A(b)(2) of this title, and, after the allowed claims evidenced by a late-filed proof of claim have been paid in full, as provided in the assignment agreement.

(j) An assignee may make interim distributions after considering future expenses and the reserves for disputed claims established under § 7312A(c) of this title.

§ 7316A. Claim subordination.

(a) A subordination agreement is enforceable under this chapter to the same extent the agreement is enforceable under other law.

(b) Subject to subsection (c) of this section, the following claims are subordinate to a claim or interest that is senior or equal in priority to a claim or interest represented by a security or other equity interest in the assignor or an affiliate of the assignor:

(1) A claim arising from rescission of a purchase or sale of the security or other equity interest;

(2) A claim for damages arising from the purchase or sale of the security or other equity interest; and

(3) A claim for reimbursement or contribution allowed on account of the rescission or damage claim.

(c) If the security is common stock or another common equity interest, a claim subject to subordination under subsection (b) of this section has the same priority as common stock or another common equity interest.

§ 7317A. Liability.

(a) An assignor is not personally liable for an act or omission by the assignee.

(b) An assignee is not personally liable for an act or omission by the assignor.

(c) A representative designated by an assignor under § 7308A(b)(4) of this title is exculpated to the same extent as a person acting on behalf of the assignor under other law had there been no assignment, except for an act or omission resulting from the representative’s gross negligence or willful misconduct.

(d) A term of an assignment agreement relieving the assignee of liability is unenforceable to the extent the agreement relieves the assignee of liability for an act or omission committed in bad faith or with reckless indifference to the purposes of the assignment or the interests of the creditors of the assignment estate.

(e) Subject to subsection (f) of this section, an assignee is liable for breach of a fiduciary duty under § 7309A(a) of this title. If the assignee is liable:

(1) The assignee is liable to a creditor for an individualized harm to the creditor if the harm is not shared by all creditors or a class of creditors; and

(2) The assignee is liable to the assignment estate for a harm shared by all creditors or a class of creditors.

(f) An assignee is not liable if, in the performance of the assignee’s duties and exercise of the assignee’s powers, the assignee relies in good faith on:

(1) A record of the assignor;

(2) Information, an opinion, a report, or a statement presented to the assignee by the assignor’s officer or employee, a committee of the assignor’s board of directors, an independent director or manager of the assignor, or another representative of the assignor; or

(3) Information, an opinion, a report, or a statement presented to the assignee by another person that has been selected with reasonable care by or on behalf of the assignee as to a matter the assignee reasonably believes is within the other person’s professional or expert competence.

§ 7318A. Assignee removal; successor assignee.

(a) The assignor or a creditor may request the Court of Chancery to remove the assignee, if the assignor or creditor has a reasonable belief grounds for removal exist under subsection (b) of this section.

(b) After a request under subsection (a) of this section or on the Court of Chancery’s initiative in an action pending before the Court under § 7321A of this title, the Court may remove an assignee:

(1) For cause, including the assignee’s fraud, dishonesty, incompetence, gross mismanagement, or failure to materially comply with this chapter;

and

(2) If removal of the assignee best serves the interests of the creditors.

(c) After an assignee resigns, or is removed, dies, or becomes incapacitated, a successor assignee provided for in the assignment agreement becomes the assignee, unless the successor assignee is not eligible to be an assignee under § 7304A(a) of this title or is subject to removal under subsection (b) of this section. The Court of Chancery shall appoint a successor assignee if:

(1) The assignment agreement does not provide for a successor assignee; or

(2) The successor assignee provided for in the assignment agreement is ineligible to be an assignee under § 7304A(a) of this title or is subject to removal under subsection (b) of this section.

(d) Subject to § 7317A of this title, an assignee that resigns, or is removed, dies, or becomes incapacitated, is discharged from the assignee’s duties under this chapter when the assignee, or a representative of a deceased or incapacitated assignee:

(1) Accounts for and turns over to the successor assignee all assets of the assignment estate; and

(2) Submits to creditors a report summarizing the receipts and disbursements made during the service of the assignee.

(e) Subject to an applicable privilege, the Court of Chancery may order an attorney, accountant, or other person that has information in a record relating to the assignment estate or the assignor’s financial affairs to turn over or disclose the record to the successor assignee.

§ 7319A. Winding up.

(a) On completion of an assignee’s duties, the assignee shall send a creditor whose claim is allowed under § 7311A of this title, and not satisfied in full, a final accounting sufficient to inform the creditor of all material aspects of the assignment, including:

(1) A description of the actions taken by the assignee under the assignment;

(2) A summary of the assets received by the assignee at the commencement of the assignment and the assets received by the assignee during the assignment;

(3) A summary of disbursements made by the assignee during the assignment for the purpose of administering the assignment estate, including the fees charged by the assignee, and payments to professionals, for rent, and for business purchases;

(4) A summary of collections and dispositions of assets by the assignee;

(5) A summary of distributions made or proposed to be made by the assignee for creditor claims;

(6) A description of additional work to be done by the assignee to complete the administration of the assignment estate and the distributions under § 7315A of this title; and

(7) Other information considered reasonably necessary by the assignee.

(b) Except as otherwise provided in the final accounting or if the assignee has not fulfilled the assignee’s duties under this chapter, the assignee is discharged from the assignee’s duties under this chapter when the assignee sends the final accounting and distributes all the assets of the assignment estate.

(c) If the final accounting describes additional work under paragraph (a)(6) of this section, the assignee shall exercise the powers appropriate to complete the work.

§ 7320A. Interstate

matters; choice of law.

(a) Subject to subsection (b) of this section, an assignment made under the law of another state must be recognized and enforced on an issue if the result for the issue would be substantially similar to the result for the issue if the assignment had been made under this chapter.

(b) If a claim for wages, salaries, or commissions or a claim of a governmental unit exists in another state, for the purpose of determining the priority of the claim under § 7315A(f)(2) of this title, the assignee shall use the amount asserted or determined under the law of the other state.

(c) If an assignee determines that a creditor should receive the treatment the creditor would receive under an assignment made under the law of another state, the assignee may treat the creditor as the creditor would be treated in the other state.

(d) An assignment agreement that provides for the application of Delaware law shall be governed by and construed under the laws of the State of Delaware in accordance with its terms.

(e) The Court of Chancery, on its own initiative or upon the request of a party in interest, may communicate directly with, or request information or assistance directly from, another court of competent jurisdiction before which an assignment proceeding has been commenced on behalf of an assignor that is an affiliate of an assignor in an assignment made under this chapter.

§ 7321A. Court

action; rebuttable presumption of notice.

(a)(1) Within 14 days of entry into an assignment agreement, the assignee shall file a petition with the Court of Chancery.

(2) The Court of Chancery may hear and resolve a matter involving the administration of an assignment or the exercise of an assignee’s powers and duties, including a request for instructions or approval or to declare rights and to discharge the assignee.

(b) Without limiting the rights of the assignee or a creditor or other interested person to request the Court of Chancery to hear or resolve a matter under subsection (a) of this section, on request of the assignee, the Court may issue an order relating to the administration of the assignment or the exercise of the assignee’s powers and duties, including an order for disposition of an asset, auction or sale procedures in connection with a contemplated asset disposition, or the incurrence of an

obligation or a debt.

(c) Acceptance of the assignment by the assignee constitutes the assignee’s consent to the jurisdiction of the

Court of Chancery.

(d) The Court of Chancery may adopt rules to administer or implement this chapter.

(e) For any provision of this chapter, or Court of Chancery rule relating to this chapter, requiring notice, if the notice is provided in compliance with the Rules of the Court of Chancery, there is a rebuttable presumption that the notice was received.

§ 7322A. Ancillary assignee.

(a) Subject to other law of this State governing a person from another state serving as a fiduciary in this State, the Court of Chancery may appoint a person serving as an assignee in an assignment in another state, or the person’s nominee, as an ancillary assignee relating to assigned assets located in this State or subject to the jurisdiction of the Court of Chancery in this State, if:

(1) The person or nominee would be eligible to serve as an assignee under § 7304A of this title; and

(2) The appointment furthers the person’s possession, custody, control, or disposition of an assigned asset under the assignment in the other state.

(b) The Court of Chancery may issue an order that implements an order entered in another state appointing or directing an assignee or otherwise concerning an assignment in the other state.

(c) Unless the Court of Chancery orders otherwise, an ancillary assignee appointed under subsection (a) of this section has the rights, powers, and duties of an assignee appointed under this chapter.

(d) A person in possession, custody, or control of an assigned asset in this State, other than a creditor holding a lien or a right of setoff or recoupment relating to the asset, shall, on notification in a record by an ancillary assignee appointed under subsection (a) of this section, turn over the asset to the ancillary assignee.

§ 7323A. Provisions variable by agreement.

(a) Except as provided in this section and § 7310A(b) of this title, the provisions of this chapter may not be varied by agreement.

(b) The duties under §§ 7308A(a) and 7309(a) of this title may not be disclaimed by agreement. An assignor and the assignee may determine by agreement the standards measuring the fulfillment of the duties of the assignor under § 7308A of this title and the assignee under § 7309A of this title if the standards are not manifestly unreasonable.

(c) Except as provided in § 7317A(d) of this title, the assignment agreement may limit the assignee’s liability under § 7317A of this title, including to creditors or for derivative claims, and may require the assignee be indemnified by the assignment estate.

(d) Except as provided under § 7307A(a) of this title, whenever this chapter or the Rules of the Court of Chancery require an action to be taken within a reasonable time, a time not manifestly unreasonable may be fixed by agreement.

(e) The assignment agreement may provide for duties of the assignee in addition to those in this chapter.

§ 7324A. Uniformity of application and construction.

In applying and construing this uniform act, a court shall consider the promotion of uniformity of the law among states that enact it.

Section 2. Amend § 7381, Title 10 of the Delaware Code by making deletions as shown by strike through and insertions as shown by underline as follows:

§ 7381. Filing inventory of property assigned.

In every case in which any person makes a voluntary assignment of his or her estate, real or personal, or of any part thereof to any other person in trust for his or her creditors or some of them, the assignee, within 30 days after the execution thereof, shall file in the office of the Register in Chancery of the county in which the real and personal estate of the assignor is situate, an inventory or schedule of the estate or effects so assigned, accompanied with an affidavit by such assignee, that the same is a full and complete inventory of all such estate and effects, so far as the same has come to his or her knowledge.

[Repealed, but see Chapter 73A of this title and Section 9 of this Act.]

Section 3. Amend § 7382, Title 10 of the Delaware Code by making deletions as shown by strike through and insertions as shown by underline as follows:

§ 7382. Appointment and duties of appraisers.

Upon the filing of the inventory and affidavit required by § 7381 of this title, the Court of Chancery shall appoint 2 disinterested and competent persons to appraise the estate assigned, who shall, after being duly sworn or affirmed by some person having authority to administer oaths, to perform their duties with fidelity, forthwith proceed to make an appraisement of the estates and effects assigned, according to the best of their judgment, and having completed the same, shall return the inventory and appraisement to the office of the Register in Chancery of the county in which the inventory of the assignee and the affidavit accompanying the same were filed. The appraisers shall receive the same compensation as is now allowed by law to appraisers of the estate of a decedent.

[Repealed, but see Chapter 73A of this title and Section 9 of this Act.]

Section 4. Amend § 7383, Title 10 of the Delaware Code by making deletions as shown by strike through and insertions as shown by underline as follows:

§ 7383. Assignee’s bond.

(a) The assignee shall, as soon as the inventory and appraisement required by § 7382 of this title have been filed, give bond with sufficient surety, to be approved by the Court of Chancery in an amount fixed by the Court, being not less than the total amount of inventory and appraisement of the estate so assigned. The bond shall be taken in the name of the State, and the condition thereof shall be as follows:

“The condition of this obligation is such, that if the above bounden assignee of shall in all things comply with the provisions of this chapter, and shall faithfully execute the trust confided to him or her, then the above obligation to be void, otherwise to remain in full force and virtue.”

(b) To the bond there shall be subjoined a warrant of attorney to confess judgment thereon, and the bond and warrant shall be joint and several, and such bond shall be filed in the office of the Register in Chancery of the county in which the inventory and appraisement were filed, and shall inure to the use of all persons interested in the property assigned.

[Repealed, but see Chapter 73A of this title and Section 9 of this Act.]

Section 5. Amend § 7384, Title 10 of the Delaware Code by making deletions as shown by strike through and insertions as shown by underline as follows:

§ 7384. Proceedings on bond.

Upon the application of any person interested, the Court of Chancery may direct the bond provided under § 7383 of this title to be proceeded on if it deems it necessary and proper for the protection of such interested party.

[Repealed, but see Chapter 73A of this title and Section 9 of this Act.]

Section 6. Amend § 7385, Title 10 of the Delaware Code by making deletions as shown by strike through and insertions as shown by underline as follows:

§ 7385. Assignees’ accounts and exceptions.

(a) The assignee shall render an account of the assignee’s trusteeship every year from the date of the assignee’s bond, required under § 7383 of this title, before the Register in Chancery of the proper county, until the trusteeship is closed and a final account rendered and approved. If the assignee fails to perform this duty, the Register in Chancery may issue a citation to such assignee, requiring the assignee to appear and exhibit under oath or affirmation the accounts of the trusts, within a certain time to be named in such citation.

(b) Upon the filing of any such account, notice thereof shall be given to all persons in interest as directed by an appropriate order of the Court of Chancery. Such order and notice shall set forth the time within which any person in interest may take and file with the Register in Chancery, in and for the proper county, exceptions to the account in question. The time within which exceptions to any such account may be filed by any person in interest shall be determined by the Court in the exercise of its discretion, and may be extended from time to time for good cause shown. Any exceptions so filed in respect of any such account shall be heard, determined and the particular account adjusted before the Court, as it may order or direct.

[Repealed, but see Chapter 73A of this title and Section 9 of this Act.]

Section 7. Amend § 7386, Title 10 of the Delaware Code by making deletions as shown by strike through and insertions as shown by underline as follows:

§ 7386. Removal of assignees.

The Court of Chancery, upon cause being shown, may remove the assignee or trustee referred to in this chapter, and compel an assignment of the trust estate to others appointed in their stead. Any order of the Court in the premises may be enforced by attachment and imprisonment.

[Repealed, but see Chapter 73A of this title and Section 9 of this Act.]

Section 8. Amend § 7387, Title 10 of the Delaware Code by making deletions as shown by strike through and insertions as shown by underline as follows:

§ 7387. Void preferences of creditors.

Whenever any person, in contemplation of insolvency or in contemplation of taking the benefit of any of the insolvent laws of this State, makes an assignment of his or her estate or effects for the benefit of creditors, and by such assignment, either under its provisions or otherwise, prefers any creditor to others, or in or by such assignment, secures or pays to any creditor a greater proportion of his or her debt or demand than shall be secured or paid to all his or her creditors, every such assignment so giving a preference shall be deemed fraudulent and absolutely void, and the estate or effects contained therein shall be liable to be taken in execution, or attached, for the payment of such assignor’s debts, as fully as if no such assignment had been made; and whoever makes such fraudulent assignment shall forever be deprived of the benefit of any insolvent law of this State.

[Repealed, but see Chapter 73A of this title and Section 9 of this Act.]

Section 9. Sections 7381 through 7387 of Title 10 of the Delaware Code continue to apply to an assignment made before the effective date of this Act.

Section 10. Amend § 5401, Title 30 of the Delaware Code by making deletions as shown by strike through and insertions as shown by underline as follows:

§ 5401. Definitions [For application of this section, see 81 Del. c. 384, § 3].

As used in this subchapter, except where the context clearly indicates a different meaning:

(1) “Document” means any deed, instrument or writing whereby any real estate within this State, or any interest therein, shall be quitclaimed, granted, bargained, sold, or otherwise conveyed to the grantee, but shall not include the following:

z. Any

conveyance by an assignor or assignee for the benefit of the assignor’s creditors under

Chapter 73A of Title 10.

SYNOPSIS

With only minor modifications consistent with Delaware law and practice, this Act adopts the Uniform Assignment for Benefit of Creditors Act (the “Uniform Act”), authored by the Uniform Law Commission. The Uniform Law Commission “provides states with non-partisan, well-conceived and well-drafted legislation that brings clarity and stability to critical areas of state statutory law.” The Uniform Act was approved by the Uniform Law Commission in October 2025 and, as of March 2026, has been enacted in Nebraska and Utah and introduced in Alabama, Arizona, Colorado, Iowa, and Oklahoma.

Because this Act adopts the Uniform Act with only minor modifications, the “Comments” to the Uniform Act may be deemed to be persuasive authority in interpreting this Act; provided, however, that the second and third sentences of the Comment to Section 2 of the Uniform Act shall instead be deemed to read as follows: “If an asset is not assignable by its terms or under other law, that asset is not part of the assignment estate unless either any required consent is obtained or other law overrides the anti-assignment provision. This Uniform Act does not preclude the assignee from negotiating with any person whose consent is required for an assignment to obtain its consent for the assignment of an asset.”

This Act provides for the use of an assignment for benefit of creditors (an “ABC”), which is an efficient and flexible state law mechanism to wind up a distressed business.

Although the use of an ABC to liquidate the assets of a failing business is rooted in the common law, the various states have significant differences in their statutes or common law of ABCs and Delaware’s statute has few details, was enacted many decades ago, and has not subsequently been revised. This inconsistency and lack of detail leads to significant variance throughout the country in the utility of ABCs and the frequency with which ABCs are used. This Act addresses this gap in the law by cementing the common law in statute and providing updates that modernize the law and provide clarity to assignors, assignees, and creditors alike.

In an ABC, a financially distressed business, called an “assignor,” transfers control of all of its assets to an “assignee,” who acts as a fiduciary for the business’s creditors. The assignee liquidates the business’s assets and distributes the proceeds to the business’s creditors. These proceeds go towards payment of the creditors’ claims against the assignor.

This Act creates a state law alternative to other procedures available to the assignor for winding up its business and provides benefits that are not available through a federal bankruptcy case or a state or federal law receivership. In many cases, an ABC will be more flexible, quicker, and less costly than the other alternatives. An ABC may be an improvement on these alternatives in certain situations in significant ways: (1) it is debtor-initiated; (2) it provides assurances to creditors by imposing fiduciary duties upon the assignee; (3) it aims to maximize the value of the business’s assets for the benefit of all creditors; and (4) it encourages cooperation between the distressed business and the creditors by aligning these parties’ goals.

This Act’s roadmap for ABCs clearly establishes:

(1) The persons eligible to be assignors and the qualifications for assignees;

(2) The relationship between an ABC under this Act and existing federal and state statutes, including the Bankruptcy Code;

(3) The contents of the assignment agreement;

(4) The effect of an ABC on the assignor’s property interests and the procedure for conveying those assets to the assignee;

(5) Procedures for notifying creditors of the ABC and the implications of the opt-out decision;

(6) Duties and powers of the assignor and assignee, including limitations on liability;

(7) A process for allowing and disputing claims;

(8) A waterfall for the distribution of proceeds to secured and unsecured creditors and payment of expenses incurred by the assignee;

(9) Procedures for winding up the assignment estate;

(10) The extent of recognition of out-of-state transactions and appointment of an ancillary assignee for administration of out-of-state assets; and

(11) That a conveyance by an assignor or assignee for the benefit of the assignor’s creditors under this Act is not subject to this State’s realty transfer tax.

This Act is intended to replace Delaware’s current ABC law, resulting in the repeal of the current law under Sections 2 through 8 of this Act and provision, under Section 9 of this Act, for the continued application of the current law for existing ABCs made before the effective date of this Act.

Author: Senator Brown