On June 10, 2026, Delaware joined four other states and enacted a version of the Uniform Assignment for the Benefit of Creditors Act (the Act). The Act constitutes a significant change to Delaware’s prior statute, first enacted in 1875, and modernizes and streamlines Delaware’s assignment for the benefit of creditors process.1
Background
Assignments for the benefit of creditors (ABCs) offer a mechanism through which a company experiencing financial distress may transfer control of all its assets to an entity (the assignee) that acts as a fiduciary for the company’s creditors. Assignees are generally professional advisors with expertise in such processes, and it is common for a company’s board of directors and officers to resign after an assignment is made. Consistent with an assignee’s fiduciary duties and the assignment agreement, the assignee is empowered to wind-down the company, liquidate the company’s assets, and distribute proceeds thereof to the company’s creditors in accordance with a waterfall established by statute.
Advantages of Delaware ABCs
ABCs can provide an advantageous wind-down mechanism for companies experiencing financial distress, as compared to alternative processes available under chapters 7 or 11 of the Bankruptcy Code or state or federal receiverships. The advantages of a Delaware ABC include: (i) control over when and whether to initiate an ABC, (ii) more efficiency and less cost than chapter 11 bankruptcy, (iii) less publicity, and (iv) the ability for the company to select an experienced and commercial party as the assignee. For creditors, a Delaware ABC provides: (i) reassurance that the liquidation will be conducted fairly by a third-party fiduciary to the creditors, (ii) transparency into the liquidation because ABCs occur in open court, and (iii) a forum for any claim disputes.
Understanding the Act: Key Changes from Prior Delaware Law
The Act adopts the Uniform Assignment for the Benefit of Creditors Act (Uniform Act), authored by the Uniform Law Commission, with only minor non-substantive modifications. Goals of the Uniform Act include modernizing and standardizing the ABC process across the U.S. As of June 2026, versions of the Uniform Act have been enacted in Delaware, Alabama, Arizona, Nebraska, and Utah, and have been introduced in Colorado, Iowa, Oklahoma, and West Virginia.
The Act repeals certain costly features of Delaware’s prior ABC statute such as the requirements for the assignee to post a bond, the appointment and retention of two appraisers to appraise the assignment estate, and the filing of an inventory of the estate’s assets. The Act preserves the oversight role of the Delaware Court of Chancery over the process, providing a forum to resolve disputes related to the ABC and the formality of court orders confirming that the process was conducted in a manner consistent with the fiduciary obligations of the assignee. While the Court of Chancery will oversee the process, its approval of sale procedures, asset sales, and debt incurrence is not a requirement. This is intended to provide assignees with flexibility to quickly achieve value maximization for creditors.
The Act offers several additional features, including clarifying and streamlining the procedures for filing, recording, and transferring title to assets in the assignment estate, and formalizing the notice requirements for submission of claims by creditors. These modifications will allow an assignee to gauge compliance easily with the law’s requirements and provide an orderly process to resolve claims against the assignment estate. Likewise, the Act clearly lays out a priority waterfall to guide distributions by the assignee.
The Act’s enactment comes on the heels of the appointment of the Honorable Timothy J. Fox, Jr., a former trial attorney with the division of the U.S. Department of Justice tasked with overseeing bankruptcy cases, to the Court of Chancery as a Magistrate. Chancellor Kathaleen St. J. McCormick commented in a press release on Magistrate Fox’s appointment that his appointment “will enhance the court’s ability to handle … petitions for the assignment for the benefit of creditors.”2
For more information about this legislation or other restructuring-related matters, please contact Erin Fay or any member of the Restructuring practice at Wilson Sonsini Goodrich & Rosati.
Ryan Greecher, Catherine Lyons, and Evie Hammer contributed to the preparation of this alert.
[1] See: https://www.legis.delaware.gov/BillDetail/143009.
[2] Press Release, “The Honorable Timothy J. Fox, Jr., Joins the Court of Chancery as Magistrate in Chancery” (April 27, 2026) https://courts.delaware.gov/forms/download.aspx?id=326768.
