Can a New York business hang a going out of business sign; close its doors – failing to pay a New York commercial debt? Are there mandated steps a business must follow to wind down or cease operation? Must an offer of settlement be made to resolve outstanding monies owed?
As New Yorkers we see it every day – trucks loaded during “off” business hours with inventory, equipment, including refrigerators, high-end espresso machines, fixtures: display cases, ovens, furnishings and more. In business one day, out of business the next.
The activity of secreting inventory, fixtures and equipment that are liened or secured by a lender or other third party is illegal.
There are steps to formally close down a corporation, most of them being accounting functions. If there are assets available to liquidate to pay creditors then, the debtor may go through an informal liquidation or, a workout outside of Court. A percentage of monies owed to creditors may be offered.
Filing bankruptcy as an alternative is expensive. Voluntary bankruptcy is not a path taken by companies without assets, more than one creditor or without liabilities that may extend to the Officers, Directors and Shareholders.
The truth is that when there aren’t any assets to pay creditors, most debtor companies fail to close or wind down the company. Companies without assets just shut down. The corporation is eventually dissolved by the Secretary of State for failing to pay taxes.
Secured assets including liened equipment, receivables and fixtures belong to the secured party not to the debtor. If not returned to their rightful owner, the abandoned assets may be retrieved by the creditor with the cooperation of a landlord, bank or other. If cooperation is not given, an application is made to the Court for an Order of Replevin or Reclamation, directing the collateral properly be returned to the secured party.
Our client SunTrust Bank was in the business of financing the acquisition of auto parts. Dealers were required to maintain inventory systems monitored by client. As inventory was sold, dealers were to immediately pay the Bank for the parts. Careful electronic monitoring allowed client to realize sales and receivable transactions in real time. When payment was not immediately forthcoming, client knew something was up
When we work with creditors who finance inventory we recommend hiring an independent third party security firm to monitor debtor’s premises. We arrange surveillance immediately before proceeding. Then contact is made with debtor and we go into Court for an emergency Order to seize collateral and same time request judgment for the monies owed client. By monitoring debtor’s premises we have proof and hopefully can prevent “night time moving” or other criminal activity related to client’s collateral.
The best way to prevent getting beat on a New York commercial debt is to carefully track terms and customer payments. Track debtor payments by due date, date usually paid and frequency. Changing payment patterns is an alert that something is going on. Enforce your right to get paid immediately. Don’t wait for a night time move, or “Out of Business” sign when it is most often too late to get paid on your New York Commercial Debt.
Need help getting paid on a New York Commercial debt or information on how to best protect your interests? Contact Jocelyn Nager jnager@ffgnesqs.com
