dump-buyback

A plan by which the owners of a failing business form a new legal entity which then purchases some or all of the assets of the first business for their liquidation value. This can be done informally with the consent of the failing business's creditors, who will use the proceeds to recoup a portion of the money owed to them, or it can be accomplished via a public auction or an assignment for benefit of creditors proceeding. Occasionally "dump-buyback" is also used to describe a business bankruptcy where the owners of the bankrupt business form a new business entity and submit a formal bid to purchase their former assets, usually for a fraction of what was originally owed.

Category: Business, LLCs & Corporations