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ARIZONA HOUSE OF REPRESENTATIVES57th Legislature, 2nd Regular Session |
Senate: FIN DP 6-0-1-0 | Third Read 29-0-1-0-0 |
SB 1252: uniform assignment; benefit of creditors
Sponsor: Senator Mesnard, LD 13
Committee on Commerce
Overview
Adopts the Uniform Law Commission's (ULC) Uniform Assignment for Benefit of Creditors Act (Act) which governs a process for an assignor and an assignee to liquidate assets and distribute the proceeds to the assignor's creditors.
History
Every assignment made by an insolvent debtor, or in contemplation of insolvency, for the benefit of his creditors, is required to provide for a distribution of all real and personal property other than that which is by law exempt from execution, among all creditors in proportion to their respective claims. However the assignment is made or expressed, it is required to have such effect and be construed to pass all such property, whether or not specified. Every assignment for the benefit of creditors is required to be acknowledged and recorded in the manner provided by law for conveyances of real or other property (A.R.S. § 44-1031).
The Uniform Law Commission is an organization that provides states with non-partisan legislation which brings clarity and stability to critical areas of state statutory law. The ULC drafted the Uniform Assignment for Benefit of Creditors Act which is a voluntary, debtor-initiated state law alternative to federal bankruptcy, state receiverships, and voluntary workouts.
Provisions
Act Applicability
1. Applies the Act to an assignment made by an assignor that is an organization that meets specified descriptions or an individual who is an Arizona resident. (Sec. 1)
Assignee Requirements
2. Specifies, for a person to be deemed as an assignee, the person cannot:
a. be a creditor, affiliate or insider of the assignor;
b. be an affiliate or insider of a creditor of the assignor;
c. have a claim against the assignment estate, other than a claim for fees and expenses to be paid under the assignment agreement;
d. 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;
e. hold an equity interest in the assignor other than a noncontrolling interest in a publicly traded company; or
f. be an affiliate of a person that fails to satisfy the outlined requirements. (Sec. 1)
3. Specifies an assignee is not precluded from being an assignee merely because the person performed services for the assignor before the assignment. (Sec. 1)
Assignment Agreement
4. Specifies that an assignment agreement must be in a record signed by the assignor and the assignee and outlines record requirements. (Sec. 1)
5. Deems the assignor's assets to be assigned if an assignee relies in good faith on the assignor's representation even if the representation is inaccurate. (Sec. 1)
6. Specifies the assignee obtains the rights, title and interest of the assignor in the assigned assets and if the assignor is an organization the assignee will obtain all of these after the assignment. (Sec. 1)
7. Outlines the effects of assigning the assets and assignment agreement for the assignee and assignor. (Sec. 1)
Filing and Recording Requirements
8. Allows an assignee of a legal or equitable interest in personal property to file a financing statement in certain filing offices. (Sec. 1)
9. Provides requirements for filing a financing statement. (Sec. 1)
10. Specifies that a filing of a financing statement is not itself a factor in determining whether an asset secures an obligation, and the rights of the assignee are not affected if the assignee does not file a financing statement. (Sec. 1)
11. Requires an assignee to:
a. 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; and
b. comply with other laws governing the transfer of title to an asset. (Sec. 1)
12. Specifies the assignor, by signing an assignment agreement, authorizes the assignee to take the actions relating to the filing requirements. (Sec. 1)
Creditor Notification
13. Requires an assignee, unless the creditor waives the right to notification, to send a notification of the assignment to each creditor known to the assignee within a reasonable time and not to exceed 30 days after the effective of the assignment agreement. (Sec. 1)
14. Outlines the notification requirements. (Sec. 1)
15. Requires an assignee to use reasonable means to provide the information in the notification to unknown creditors. (Sec. 1)
Assignor Duties
16. Declares the assignor has a duty to take all reasonable actions necessary for the assignee to administer the assignment, the assigned assets and the assignment estate. (Sec. 1)
17. Delineates further duties of the assignor. (Sec. 1)
18. Applies the delineated duties to the designated representative acting on behalf of the assignor. (Sec. 1)
Assignee Powers and Duties
19. Declares the assignee has a fiduciary duty to the assignment estate for the benefit of creditors, as follows:
a. of loyalty, including the duty to manage the assignment in good faith;
b. to use reasonable care to maximize distributions; and
c. to wind up the assignment in a manner compatible with the best interests of the assignment estate and creditors. (Sec. 1)
20. Delineates further powers and duties of the assignee. (Sec. 1)
21. Asserts certain powers are exclusive to the assignee with respect to a creditor that submits a proof of claim. (Sec. 1)
22. Outlines the lien status an assignee has on the assignment estate. (Sec. 1)
23. Details the assignee's powers relating to avoiding 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. (Sec. 1)
Allowed Claims
24. Requires an assignee to allow a creditor's claim if:
a. the creditor submits a proof of claim; and
b. the assignee does not dispute the claim before final distribution. (Sec. 1)
25. Allows an assignee to either:
a. allow a claim, pay a known liquidated claim or accept a notice to the assignee of a claim even if the creditor does not submit a proof of claim; or
b. 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. (Sec. 1)
26. Requires any unsecured portion of an allowed claim to be valued as of the effective date of the assignment agreement. (Sec. 1)
27. Specifies a creditor's claim is allowed if the creditor succeeds in a dispute preceding. (Sec. 1)
28. Provides requirements for an assignee in creating a complete list of creditors that have submitted a proof of claim and notifying creditors who will receive no distribution. (Sec. 1)
Claims
29. Allows an assignee to dispute a creditor's claim before final distribution by sending notification on the nature of the dispute. (Sec. 1)
30. Includes stipulations for commencing a proceeding to disallow the claim, if a dispute cannot be resolved consensually. (Sec. 1)
31. Requires an assignee to create a dollar-for-dollar reserve for the estimated amount of the potential distribution on a disputed claim. (Sec. 1)
32. Provides requirements for disallowing a claim for reimbursement or contribution of a person that is liable with the assignor. (Sec. 1)
33. Specifies an assignee may reconsider the assignee's decision to allow or disallow a claim for cause and requirements for payment to a creditor on a reconsider claim. (Sec. 1)
34. Includes requirements for a proof of claim. (Sec. 1)
35. Specifies a proof of claim that is in compliance with the requirements for proof is prima facie evidence of the validity and amount of the claim. (Sec. 1)
36. Adds that the submission by a creditor of a proof of claim that complies with the requirements constitutes the creditor's consent to the jurisdiction of the applicable court and assignment to the assignee of any right of the creditor to bring a voidable transaction action relating to the creditor's claim. (Sec. 1)
37. Specifies subordinate agreements are enforceable to the same extent that the agreement is enforceable under other laws. (Sec. 1)
38. Outlines the claims that 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. (Sec. 1)
39. Stipulates a claim subject to subordination has the same priority as a common stock or another common equity interest if the security is common stock or another common equity interest. (Sec. 1)
Transferees' rights
40. Outlines an assignee's disposition of an asset. (Sec. 1)
41. Declares a transferee that acts in good faith takes free of the rights and interests described in the asset's disposition, even if the assignee fails to comply with the Act or the requirements of a judicial proceeding. (Sec. 1)
42. Stipulates the transferee, who does not take free of the rights and interests, takes the asset subject to outlines requirements. (Sec. 1)
43. Specifies any warranty arising by operation of other law is disclaimed to the extent permitted by other law, unless otherwise provided in a record. (Sec. 1)
44. Provides requirements for the assignee in filing a record with the official if a subordinate security interest or other lien is discharged. (Sec. 1)
Distributions
45. Instructs the assignee to pay claims from the assignment estate in the order of priority as outlined. (Sec. 1)
46. Prescribes the order of priority of distributions with the protected secured creditor having first priority before other distributions. (Sec. 1)
47. Requires, after the distributions made to the protected secured creditor, the assignee to pay the necessary costs of the administration of the assignment estate and outlines the costs. (Sec. 1)
48. Details the order of priority of distributions, including:
a. payment of claims entitled to priority under federal law;
b. payment of claims for wages, salaries or commissions earned; and
c. payment to each creditor. (Sec. 1)
49. Outlines the distribution of claims if the assets are insufficient to pay the total amount of the claims. (Sec. 1)
50. Specifies, after payments are made, the residue must be distributed to allowed claims evidenced by a late-filed proof of claim and, after the allowed late-filed claims, as provided in the assignment agreement. (Sec. 1)
51. Allows an assignee to make interim distributions after considering future expenses and the reserves for disputed claims. (Sec. 1)
Liability
52. Asserts an assignor is not personally liable for an act or omission by the assignee nor is an assignee personally liable for an act or omission by the assignor. (Sec. 1)
53. Specifies a representative designated by an assignor is exculpated to the same extent as a person acting on behalf of the assignor had there been no assignment, except for an act or omission resulting from the representative's gross negligence or willful misconduct. (Sec. 1)
54. Specifies 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 of omission committed in bad faith or with reckless indifference to the purposes for the assignment or the interest of the creditors of the assignment estate. (Sec. 1)
55. Deems an assignee as personally liable for a breach of a fiduciary duty and outlines stipulations for being liable. (Sec. 1)
56. Adds that the assignee who relies in good faith on specified information is not liable. (Sec. 1)
Assignee Removal
57. Allows the assignor or a creditor to request a court of competent jurisdiction in Arizona to remove an assignee, if the assignor or creditor has a reasonable belief that grounds removal exist. (Sec. 1)
58. Outlines the specific grounds for removing an assignee. (Sec. 1)
59. Specifies the successor assignee provided for in the assignment agreement, unless the assignee is not eligible, becomes the assignee. (Sec. 1)
60. Instructs the court to appoint a successor assignee if:
a. the assignment agreement does not provide for a successor assignee; or
b. the successor assignee provided for in the assignment agreement is ineligible to be an assignee or is subject to removal. (Sec. 1)
61. Specifies an assignee who resigns, or is removed, dies, or becomes incapacitated, is discharged from the assignee's duties when outlines conditions are met. (Sec. 1)
62. Authorizes a court to order an attorney, accountant or other person that has information relating to the assignment estate or the assignor's financial affairs to turn over or disclose the information to the successor assignee. (Sec. 1)
Winding Up
63. Instructs an assignee, on completion of their duties, to send a creditor whose claim is allowed, and not satisfied in full, a final accounting sufficient to inform the creditor of all material aspects of the assignment. (Sec. 1)
64. Includes information that must be sent to the creditor in the final accounting. (Sec. 1)
65. Deems an assignee as discharged from their duties when the assignee sends the final accounting and distributes all the assets of the assignment estate. (Sec. 1)
66. Directs the assignee to exercise the powers appropriate to complete the work if the final accounting describes additional work. (Sec. 1)
Miscellaneous
67. Stipulates 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 the Act. (Sec. 1)
68. Requires the assignee to use the amount asserted or determined under the law of the other state if a claim for wages, salaries or commissions or a claim of a governmental unit exists in another state. (Sec. 1)
69. Stipulates the assignee, if determined that a creditor should receive the treatment the creditor would receive under an assignment made under the law of another state, may treat the creditor as the creditor would be treated in the other state. (Sec. 1)
70. Includes authorizations for a court to:
a. hear and resolve a matter involving the administration of an assignment or the exercise of an assignee's powers and duties; and
b. appoint a person serving as an assignee in an assignment in another state as an ancillary assignee relating to assigned assets located in this State. (Sec. 1)
71. Contains requirements for provisions relating to variable agreements. (Sec. 1)
72. Directs a court, in applying and construing the Act, to consider the promotion of uniformity of the laws among states that enact the Act. (Sec. 1)
73. Specifies the modifications and limitations of the Act in relation to the Electronic Signatures in Global and National Commerce Act. (Sec. 1)
74. Applies the Act to an assignment made on or after the effective date of the Act. (Sec. 1)
75. Defines pertinent terms. (Sec. 1)
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79. Initials PB SB 1252
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