An ABC is a state-law alternative to formal bankruptcy in which a distressed company transfers its assets to a neutral third-party assignee who sells those assets, sometimes as a going concern, and distributes proceeds to creditors.
At CRAGSI, we define an Assignment for the Benefit of Creditors (ABC) as a state-law insolvency process in which a company voluntarily transfers legal title to all of its assets to a neutral third party — the assignee — who then sells those assets, sometimes as a going concern, and distributes the proceeds to creditors in order of priority. It is one of the most commonly used alternatives to federal bankruptcy for distressed companies, particularly in California, Delaware, and other states with well-developed ABC statutes.
Unlike Chapter 7 bankruptcy, an ABC is generally faster, less expensive, and conducted outside of court oversight. The assignee has broad powers to sell assets, wind down operations, terminate contracts, and resolve creditor claims — often completing the process in weeks to months rather than years.
ABCs often follow when a company has exhausted its runway and cannot raise additional capital. Run well, an ABC closes a company in an orderly way, maximizes creditor recoveries, and avoids the cost of a bankruptcy case. The risk is timing: an ABC chosen before anyone tests the alternatives can forgo a turnaround, a restructuring, or a going-concern sale that would have returned more.
At CRAGSI, we look first for a path that preserves the company. Our triage asks whether a going-concern sale, a restructuring, or a strategic pivot would generate higher recoveries. When an ABC is the right outcome, CRAGSI runs the process itself and can serve as assignee.
Related CRAGSI services: Wind-downs, Liquidations & Dissolutions · Turnarounds & Restructurings