By John J. Savage
Distressed businesses often turn to Chapter 7 or Chapter 11 of the Bankruptcy Code for orderly liquidation or reorganization. However, for some businesses, the cost of bankruptcy can be prohibitive. Receivership may be one alternative for businesses unable to afford (or access) bankruptcy, but the judicial proceedings and oversight can still result in significant legal and administrative expenses.
There is a non-judicial alternative to bankruptcy that may be more affordable: an assignment for benefit of creditors (an “ABC”). Similar to a bankruptcy trustee or a receiver, an assignee acts as a fiduciary to the debtor’s creditors and holds the debtor’s assets in trust for the benefit of all creditors.
The distinguishing characteristic of an ABC is that it is a non-judicial proceeding. This lack of judicial oversight is one of the benefits of ABCs to keep costs down, but it is also a potential drawback as creditors (and the assignee) do not have a readily available forum to adjudicate disputes that may arise.
Some states enacted statutes governing ABCs, but Nevada has not. ABCs in Nevada are still governed by common law. See Sadler v. Immel, 15 Nev. 265 (1880) (assignment valid under the common law “if it was fairly made for the benefit of all the creditors”).
In September of 2025, the Uniform Law Commission (“ULC”) promulgated the Uniform Assignment for Benefit of Creditors Act (the “Act”) for states to consider. The creditor claim procedures and powers of an assignee proposed under the Act are similar to the creditor claim procedures and powers of a receiver found in the Uniform Real Estate Receivership Act, which Nevada adopted in 2017 and enacted under NRS 32.100, et seq.
However, because there is no judicial oversight in an ABC, Section 12 of the Act provides that “the assignee may commence a proceeding under Section 21 to disallow” a creditor’s claim. Section 21 of the Act provides, inter alia, that a court of competent jurisdiction “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.” This also allows creditors to initiate judicial proceedings related to the ABC.
Under the Act, as proposed, the assignee must commence a judicial proceeding to resolve disputed claims before final distributions. If the proceeding is not filed before final distribution, the assignee must allow the claim.
The Act requires the ABC to be initiated through a written assignment agreement signed by the assignor, which agreement 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.
Unless a creditor waives the right to notification in writing, an assignee must send a notification of the assignment to each creditor known to the assignee within a reasonable time not to exceed a certain number days after the assignment, which the Act recommends to be set at 30 days. Ultimately, determining the best mechanism to liquidate or reorganize a distressed business requires a careful analysis of the business’ circumstances. Businesses in regulated industries should take particular care to ensure regulatory compliance before proceeding.
About the author
John Savage is member of Howard & Howard Attorneys PLLC. His practice is primarily focused on business litigation and representing state-court appointed receivers. Prior to joining Howard & Howard, John developed a niche representing receivers appointed over cannabis businesses, including the first cannabis receivership in Nevada.
About the article
This article was originally published in the Communiqué (Feb. 2026), the official publication of the Clark County Bar Association.
The Communiqué (Feb. 2026) focuses on bankruptcy law with short articles on interesting topics written by bar members for bar members. Also featured is a variety of content from the printed publication’s recurring columns and highlights on bar activities. Select content is available to read online now. See = https://clarkcountybar.org/about/member-benefits/communique-2026/communique-feb-2026/.
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