In bankrupty a court appointed liquidator can seize assets and sell them to repay creditors. Of course none of this happened here.
In bankrupty a court appointed liquidator can seize assets and sell them to repay creditors. Of course none of this happened here.
They can seize assets that belong to the entity. They can’t seize assets that belong to other people just because it happens to be on their premises, in the same way that they can’t seize and sell the cars that happen to be in a bankrupt store’s parking lot.
There are a lot of reasons why you should never sell things through consignment - but one of those reasons is that the goods cease to be yours in several significant ways. If a company is able to sell a good they could sell that good to fulfill debts - if it is a route to liquidate goods to cover debts then it's in the scope of the liquidator (though I think in most cases a sane liquidator would return the goods whole to avoid creating more debt than already exists and destroying non-fungible goods). If we assume the consignment sale was advantageous for the seller it's unlikely there's a way for the liquidator to quickly sell the goods in bulk for a better margin than the consignment contract offered so any sale they executed would likely add more debt than it cured.
I saw an analysis from a lawyer who said that there are situations where a creditor can claim consignment items, but that it didn't apply here.
Because they didn't file for bankruptcy.
They can't sieze consignment stock though?!?
"Can't" is a really bad word to use and I am not certain if "they" here are the corporation or the liquidator.
If you're talking about the corporation I think that any sensible neutral party would probably come down on the side that the corporation has no entitlement to those goods.
If you're talking about the liquidator then the goods were held by the franchise so if it went through bankruptcy those goods would be under consideration by the steward - I think they'd usually find that the original owner should be entitled to the goods since they're relatively non-fungible. The proceeds from sold goods are likely a more complicated answer since money is fungible and divisible. I could accept that there would be scenarios where a steward would think that the corporation should recover a portion of the proceeds.
> If you're talking about the liquidator then the goods were held by the franchise so if it went through bankruptcy those goods would be under consideration by the steward - I think they'd usually find that the original owner should be entitled to the goods since they're relatively non-fungible.
IANAA, but I'd say the situation is that while the goods are possessed by the franchise, but they are not owned by the franchise. Ownership title doesn't change until they're sold by the franchise to a buyer.
I could see a scenario in which the franchise contract says that BAM can automatically liquidate the franchise (and how else did BAM get immediate control of the store?), and BAM then says they've executed on that consignment contract (at perhaps not reasonable prices). But without a very well-documented paper trail that this is what they did, including actually paying the consignor the (low) proceeds of the sales, it would seem that the only other possibility here is some kind of criminal conversion.
Which points back to all of the discussion about consignment dynamics really being a red herring. The problem is a criminal conspiracy including by the police themselves, for whatever reasons that might be.
The court can do almost anything. Its happened before.
https://www.cozen.com/news-resources/publications/2020/is-yo...
I think if the consignor has not taken the correct steps then there is a risk the receiver would be able to pay other secured creditors using the consignors assets. For example if there are other creditors with liens on the inventory then you are meant to take steps to notify them of your claims on the consigned goods because otherwise the consigned goods could look like inventory to the secured creditor (https://www.lowenstein.com/news-insights/publications/articl...)