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ARIZONA STATE SENATE
Fifty-Seventh Legislature, Second Regular Session
uniform assignment; benefit of creditors
Purpose
Adopts the Uniform Assignment for Benefit of Creditors Act that governs the use of an assignment for benefit of creditors, which is a method for an assignor to transfer control of its assets to an assignee who disposes of the assets and distributes proceeds to creditors according to an order of priority.
Background
Statute governs assignments for the benefit of creditors by requiring an assignment to provide for a distribution of property among creditors in proportion to claims. An assignment for the benefit of creditors must be recorded in the same manner as deeds and conveyances. An assignment requires the consent of each creditor to accept their proportional share of the estate.
A debtor must file an assignment with the superior court along with an affidavit confirming its accuracy and requires the assignment to include an account of the debts due to creditors, a property inventory and collateral information. The assignee must record the assignment and execute a bond in an amount approved by the court, conditioned that the assignee will make proportional distribution of the property proceeds among entitled creditors. Within 30 days after recording the assignment, the assignee must give public notice in the newspaper and, if possible, give personal notice or notice by mail to each creditor. An assignee must make a final report and file the report with the court and the court must approve the report. Statute governing courts and receivers also govern an assignment for the benefit of creditors (A.R.S. Title 44, Chapter 8, Article 3).
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 Uniform Assignment for Benefit of Creditors Act (Act) was drafted in 2025 to provide an alternative to other procedures available to an assignor for winding up its business (ULC).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
Act Application
1. Applies the Act to an assignment made by an assignor that is:
a) an organization whose principal place of business is in Arizona;
b) an organization whose internal affairs are governed by other laws of Arizona;
c) an individual whose principal residence is in Arizona;
d) an organization that is wholly owned, directly or indirectly, by an assignor that satisfies one of the above requirements; or
e) an organization that is partly owned, directly or indirectly, and controlled by an assignor that satisfies one of the above requirements, has no place of business or employees and relies on services received from the assignor.
Assignee Requirements
2. Defines assignee as a person to which assets are transferred under an assignment.
3. Requires an assignee to be a person that meets the following requirements:
a) is not a creditor, affiliate or insider of the assignor;
b) is not an affiliate or insider of a creditor of the assignor;
c) does not have a claim against the assignment estate, other than a claim for fees and expenses to be paid under the assignment agreement;
d) 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;
e) does not hold an equity interest in the assignor other than a noncontrolling interest in a publicly traded company; and
f) is not an affiliate of a person that fails to satisfy the outlined requirements.
4. Specifies that a person that satisfies the requirements to be an assignee is not precluded from being an assignee merely because that person performed services for the assignor before the assignment.
5. Determines that an assignee obtains the rights, title and interests of the assignor in the assigned assets or, if the assignor is an organization, obtains the rights, title and interests of the assignor in assets acquired after the assignment.
6. Requires an assignee of a legal or equitable interest in real property to record the interest assignment or assignment notice under the real estate recording law of the jurisdiction where the property is located.
7. Requires an assignee to comply with other laws governing a title transfer.
Assignment Agreements and Assignment Administration
8. Defines assignment as a transfer by a person of all the person's assets to another person for the benefit of the transferor's creditors.
9. Requires an assignment agreement to be in a record signed by the assignor and the assignee that:
a) states the name and address of the assignor and assignee;
b) transfers or provides for a transfer of the assignor's assets;
c) describes the assigned assets in sufficient detail to identify the assets;
d) provides for the distribution of the assignment estate;
e) describes the fees to be charged by the assignee in connection with the assignment, including the calculation basis; and
f) includes a representation by the assignor, under penalty of perjury, that the assignor is assigning all the assignor's assets.
10. Specifies that the assignor, by signing an assignment agreement, authorizes the assignee to take the statutorily required actions to file, record and transfer assets.
11. Defines transfer as 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.
12. Stipulates that, if an assignee relies on the assignor's assignment representation in the agreement, all the assignor's assets are deemed to be assigned, even if the representation is inaccurate.
13. Specifies that the effective date of an assignment agreement is the date the agreement is signed by the last party, unless a later date is identified in the agreement as the effective date.
14. Allows an assignment agreement to include assignee duties beyond those outlined in the Act.
15. Specifies that whenever the Act requires an action to be taken within a reasonable time, a time not manifestly unreasonable may be fixed by agreement.
16. Requires an assignee to send a notification of the assignment to each creditor known to the assignee within 30 days after the effective date of the agreement, unless the creditor waives the right to notification.
17. Requires the assignment notification to:
a) be in a record signed by the assignee;
b) include the assignee's name, address and other contact information reasonably necessary to communicate with the assignee;
c) provide reasonable instructions for submitting a proof of claim; and
d) identify the date by which each creditor must submit a proof of claim.
18. Requires an assignee to use reasonable means to provide the required notification information to unknown creditors.
Effect of Assignment
19. Determines that:
a) an assignee takes each assigned asset subject to an existing interest in the asset held by another person;
b) an assignee holds the assigned asset subject to the assignee's duties; and
c) an assignment is subject to other laws under which the assignment may be fraudulent or otherwise voidable.
Assignor and Assignee Powers and Duties
20. Specifies that an assignor, or their authorized representative, has a duty to take all reasonable actions necessary for the assignee to administer the assignment, the assigned assets and the assignment estate and requires the assignor, or their authorized representative, to:
a) preserve and turn over to the assignee the assigned assets;
b) provide information to the assignee that is reasonably necessary to administer the assignment, assigned assets and assignment estate;
c) sign any record reasonably necessary to transfer an assigned asset and comply with any notarization required under law;
d) designate, and provide contact information for, 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, assigned assets and assignment estate;
e) if the assignment includes a legal or equitable interest in real property or titled personal property, cooperate with the assignee in the filing, recording and transfer requirements;
f) on or as soon as practicable after the assignment agreement's effective date, provide the assignee specific asset, employee and creditor information lists, verified under penalty of perjury;
g) 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 is necessary under other law; and
h) provide assistance to the assignee as required by the assignment agreement.
21. Specifies that an 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.
22. Prohibits an assignor's duties or an assignee's fiduciary duties from being disclaimed by agreement.
23. Allows an assignor and assignee to determine by agreement the standards measuring the fulfillment of the assignor's duties and an assignee's fiduciary duties if the standards are not manifestly unreasonable.
24. Specifies that an assignee has a duty to:
a) maintain a separate deposit account for monies related to the assignment;
b) collect on or dispose of each assigned asset, unless the assignee determines it is more economically efficient to abandon the asset;
c) prepare and retain appropriate business records, including a record of each receipt, disbursement and collection on or disposition of an assigned asset;
d) pay administrative expenses of the assignment estate to the extent the assignment estate has sufficient unencumbered assets;
e) establish a method that is reasonable designed to permit a creditor to submit a proof of claim;
f) establish a single date by which a creditor whose claim is not otherwise allowed without a timely proof of claim must submit proof, which must be 120 days after the effective date of the assignment agreement;
g) unless a claim would receive minimal or no distribution without regard to the claim's validity or asserted priority, examine the claim's validity and priority against the assignment estate and, if necessary, consult with the assignee's authorized representative;
h) at least every six months, provide to each creditor a summary of the assets, liabilities and expenses of the assignment estate;
i) comply with all requirements of the Internal Revenue Service and state and local taxing authorities;
j) send a notification to each 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;
k) send a final accounting, as prescribed; and
l) comply with the other statutory requirements imposed on the assignee.
25. Specifies that the assignee has the powers necessary or appropriate to perform the assignee's duties
26. Grants an assignee the power, unless the assignment agreement expressly provides otherwise, to:
a) 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;
b) incur secured or unsecured debt and pay expenses incidental to exercising the power to operate an existing business that uses an assigned asset;
c) assert a right, claim, cause of action or defense the assignor could have asserted that relates to the assignment estate;
d) 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;
e) 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;
f) 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;
g) settle a matter involving a debtor of the assignor;
h) 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;
i) recover an asset in the manner and with the same effect as the assignor could have done if the assignment had not been made;
j) settle claims against the assignment estate;
k) abandon an assigned asset;
l) 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
m) invest monies, subject to applicable prudent investor standards under other law.
27. Specifies that the assignee's power to avoid a transfer or the incurrence of an obligation is exclusive to the assignee with respect to a creditor that submits a proof of claim and that a recovery 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.
28. Specifies that, when exercising the power to avoid a transfer or a voidable transaction remedy or when otherwise establishing the priority of the assignee's interest, the assignee has a lien on the assignment estate and a lien creditor a bona fide purchaser, as specified.
29. Specifies that the assignee's power to avoid a transfer made before the assignment agreement's effective date, 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 U.S. bankruptcy laws.
30. Requires an assignee to exercise its statutory powers consistent with the assignee's fiduciary duties.
Claims
31. Defines claim as a creditor's right to payment or to an equitable remedy, regardless of whether the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured.
32. Requires a proof of claim to:
a) state the name, address and other contact information reasonably necessary to communicate with the creditor;
b) state the claim amount and, briefly, the nature of the claim;
c) identify any asset of the assignment estate securing the claim;
d) be signed by the creditor under penalty of perjury;
e) include a copy of a record, if any, on which the claim is based; and
f) be submitted using the statutorily established method by the statutorily established date.
33. Specifies that a properly submitted proof of claim is prima facie evidence of the validity and amount of the claim.
34. Specifies that a creditor's properly submitted proof of claim constitutes the creditor's:
a) consent to the jurisdiction of the court; and
b) assignment to the assignee of any right of the creditor to bring a voidable transaction action relating to the creditor's claim.
35. Requires an assignee, after the time to submit a proof of claim expires, to create a complete list of creditors that have submitted a valid proof of claim that includes:
a) the amount of the claim, if known; and
b) whether the claim is secured or unsecured and, if secured, describe the collateral for the claim.
36. 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.
37. Allows an assignee to either:
a) allow a claim, pay a known liquidated claim or accept a timely submitted claim notice, 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.
38. Requires any unsecured portion of an allowed claim to be valued as of the effective date of the assignment agreement.
39. Requires an assignee, if a class of creditors will receive no distribution on account of allowed claims, to send a notice that the creditor will receive no distribution instead of the creditor list.
40. Requires an assignee, if requested by a creditor or other interested party, to provide the list of creditors to the requestor to the extent allowed by privacy laws and subject to any privacy safeguards the assignee determines are reasonably necessary.
41. Allows an assignee to dispute a creditor's claim before final distribution by sending notification in a record stating the nature of the dispute to the creditor.
42. Allows an assignee, if a dispute cannot be resolved consensually, to commence a proceeding to disallow the claim.
43. Requires a proceeding to disallow a claim to be commenced before final distribution to creditors and requires the assignee, if the proceeding is not filed before final distribution, to allow the claim, as prescribed.
44. Requires an assignee to create a dollar-for-dollar reserve for the estimated amount of the potential distribution on a disputed claim.
45. Specifies that a creditor's claim is allowed if the creditor succeeds in a claim dispute.
46. Requires an assignee to 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 of any of the following:
a) the claim against the assignment estate is disallowed;
b) the claim for reimbursement or contribution is contingent as of the time of allowance or disallowance; or
c) the person asserts a right of subrogation to the rights of a creditor.
47. Requires 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 to be determined, and be allowed or disallowed, as if the claim had become fixed before the assignment agreement's effective date.
48. Allows an assignee to reconsider the assignee's decision to allow or disallow a claim for cause.
49. Requires a creditor, if a reconsidered claim is allowed, to receive a payment or transfer, before the assignee makes additional payments or transfers to other creditors that are equal or junior in priority, in an amount proportionate to the payments or transfers already received by the other creditors.
Payment of Claims from the Assignment Estate
50. Requires an assignee to make payments from the assignment estate in the following order of priority:
a) the protected secured creditor must receive the asset or the proceeds from the collection on or disposition of the asset to the extent of the value of the creditor's interest in the asset, less the assignee's reasonable and necessary expenses, with any remaining amount becoming an unsecured claim;
b) the necessary costs of administering the assignment estate, including:
i. fees and reimbursements of the expenses of the assignee and any professionals engaged by the assignee;
ii. post-assignment taxes incurred by the assignee;
iii. 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;
iv. post-assignment lease payments incurred by the assignee in renting personal property used in the assignor's business; and
v. amounts required to be paid under the assignment agreement for expenses of winding up the assignment;
c) claims entitled to priority under federal law;
d) claims for wages, salaries or commissions earned not more than 180 days before the earlier of the assignment agreement's effective date or the cessation of the assignor's business, with prescribed limits;
e) each creditor must receive a distribution, or a pro rata distribution if the remaining assets are insufficient to pay claims, of the assignment estate's assets in the following order:
i. unsecured claims entitled to priority ahead of claims of other unsecured creditors under other law; and
ii. unsecured claims not entitled to priority;
f) if all the above payments are made in full, 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.
51. Defines protected secured creditor as a secured creditor whose lien is a perfected lien that cannot be avoided by the assignee and which is not subordinate to the assignee's lien.
52. Allows an assignee to make interim distributions after considering future expenses and the reserves for disputed claims.
Claim Subordination
53. Specifies that a subordination agreement is enforceable under the Act to the same extent the agreement is enforceable under other law.
54. Specifies that 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 to the assignor:
a) a claim arising from rescission of a purchase or sale of the security or other equity interest;
b) a claim for damages arising from the purchase or sale of the security or other equity interest; and
c) a claim for reimbursement or contribution allowed on account of the rescission or damage claim.
55. Stipulates that a claim subject to subordination has the same priority as common stock or another common equity interest, if the security is common stock or another common equity interest.
Winding Up Assignee Duties
56. Requires 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, including:
a) a description of the actions taken by the assignee under the assignment;
b) 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;
c) 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 business purchases;
d) a summary of collections and dispositions of assets by the assignee;
e) a summary of distributions made or proposed to be made by the assignee for creditor claims;
f) a description of additional work to be done by the assignee to complete the administration of the assignment estate and the distributions; and
g) other information considered reasonably necessary by the assignee.
57. Stipulates that the assignee must exercise the powers appropriate to complete any additional work outlined in the final accounting.
58. Discharges the assignee from their duties when the assignee sends the final accounting and distributes all assets of the assignment estate, unless the assignee has not fulfilled their duties or if otherwise provided in the final accounting.
Liability
59. Deems an assignor as not personally liable for an act or omission by the assignee.
60. Deems an assignee as not personally liable for an act of omission by the assignor.
61. Exculpates an assignor's authorized representative 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 wilful misconduct.
62. Deems an assignment agreement's term relieving the assignee of liability as 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 interest of the creditors of the assignment estate.
63. Allows an assignment agreement, except as outlined above, to limit the assignee's liability and to require the assignee to be indemnified by the assignment estate.
64. Deems an assignee personally liable for breach of a fiduciary duty, unless the assignee relies in good faith on prescribed information.
Assignee Removal and Successors
65. Allows an assignor or creditor to request a court of competent jurisdiction in Arizona to remove the assignee, if the assignor or creditor has a reasonable belief that grounds for removal exist.
66. Allows a court, after a request to remove an assignee or on the court's initiative, to remove the assignee either:
a) for cause, including the assignee's fraud, dishonesty, incompetence, gross mismanagement or failure to comply with the Act; or
b) if removal of the assignee best serves the interests of the creditors.
67. Specifies that a successor assignee named in the assignment agreement becomes the assignee after an assignee resigns, or is removed, dies or becomes incapacitated and requires the court to appoint a successor assignee if:
a) the assignment agreement does not provide for a successor; or
b) the successor provided in the assignment agreement is ineligible or subject to removal.
68. Discharges an assignee who resigns or who is removed, dies or becomes incapacitated from the assignee's duties when the assignee:
a) accounts for and turns over to the successor all assets of the assignment estate; and
b) submits to creditors a report summarizing the receipts and disbursements made during the assignee's service.
69. Allows, subject to an applicable privilege, a court to 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.
Interstate Matters
70. Requires an assignment made under the law of another state to be recognized and enforced on an issue if the result would be substantially similar to the result for the issue if the assignment has been made under the Act.
71. Requires an assignee, if a claim for wages, salaries or commissions or a claim of a governmental unit exists in another state, to use the amount asserted or determined under the law of the other state to determine the claim payment priority.
72. Allows the assignee to treat a creditor as the creditor would be treated in another state, if the assignee determines that the creditor should receive the treatment the creditor would receive under an assignment made under the law of another state.
Court Responsibilities
73. Allows a court of competent jurisdiction in Arizona to 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 of approval or to declare rights.
74. Allows the court, on request of the assignee and without limiting the rights of the assignee and a creditor or other interested person to request the court to hear or resolve a matter involving an assignment, to 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 or the incurrence of an obligation.
75. Specifies that the acceptance of the assignment by the assignee constitutes the assignee's consent to the jurisdiction of the court.
76. Allows a court of competent
jurisdiction in Arizona to 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 Arizona or subject to the jurisdiction
of a court in Arizona,
if both:
a) the person or nominee meets the statutory eligibility requirements; and
b) the appointment furthers the person's possession, custody, control or disposition of an assigned asset under the assignment in the other state.
Ancillary Assignees
77. Specifies that an ancillary assignee has the rights, powers and duties of an appointed assignee, unless the court orders otherwise.
78. Requires, on notification in a record by an ancillary assignee, a person in possession, custody or control of an assigned asset in Arizona, other than a creditor holding a lien or right of setoff or recoupment, to turn over the asset to the ancillary assignee.
79. Allows the court to 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.
80. Requires a court, in applying and construing the Act, to consider the promotion of uniformity of the laws among states that enact it.
Disposition by an Assignee to a Transferee and Transferee Rights
81. Specifies that an assignee's disposition of an asset:
a) transfers to a transferee for value all the assignee's rights in the asset;
b) discharges the assignee's lien and, to the extent the assignment creates a security interest in favor of the assignee, the assignee's security interest; and
c) discharges any subordinate security interest or other lien subordinate to the assignee's lien.
82. Specifies that a transferee that acts in good faith takes free of the outlined rights and interests, even if the assignee fails to comply with the Act or the requirements of a judicial proceeding.
83. Stipulates that, if a transferee does not take free of the outlined rights and interests, the transferee takes the asset subject to the following:
a) the assignee's rights in the assets of the assignment estate;
b) the assignee's lien and, if applicable, security interest; and
c) any other security interest or other lien.
84. Disclaims any warranty arising by operation of other law to the extent permitted by other law, unless otherwise provided in a record.
85. Allows an assignee, if a subordinate security interest or other lien is discharged, to 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.
86. Requires the record to 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.
Financing Statements
87. Allows an assignee of a legal or equitable interest in personal property to file a financing statement with the Secretary of State or in the filing office of any other state in which either:
a) the assignor would be located according to state law, if the assignor were a debtor; or
b) an asset of the assignment may be located.
88. Requires a filed financing statement to indicate that it is filed in connection with an assignment and allows the statement to:
a) designate the assignor as debtor and the assignee as secured party; or
b) use the terms assignor and assignee or words of similar import.
89. Requires an assignee, when filing a financing statement, to:
a) attach a copy of the assignment agreement; or
b) state that a copy of the assignment agreement is available on request.
90. Specifies that filing a financing statement is not itself a factor in determining whether an asset secures an obligation and states that the rights of the assignee under the assignment are not affected if the assignee does not file a financing statement.
Miscellaneous
91. Outlines the Act's relation to the federal Electronic Signatures in Global and National Commerce Act.
92. Specifies that the Act applies to an assignment made on or after the general effective date.
93. Defines terms.
94. Becomes effective on the general effective date.
Prepared by Senate Research
January 22, 2026
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