Asset Purchase Agreement Sale Litigation Finance or Sale of Rights

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by a searcher from Fordham University
in New York, NY 10025, USA

6mos ago

Asset Purchase Agreement Sale Litigation Finance or Sale of Rights

Under the terms of an asset purchase agreement that my old company signed, my shareholders are to be paid ~$4 million. The payout is triggered in two weeks. The challenge I am facing is that the company has no assets to pursue the seller if they choose not to payout on the agreement. I am searching for investors who would either buy the rights to the payout or finance the litigation. Any help would be appreciated.

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reply by a searcher 6mos ago
from Fordham University in New York, NY 10025, USA

The buyer signed an asset purchase agreement that had a payout date that was 5 years after the assets were transferred. That date (the maturity date) was yesterday. The Seller is now simply a shell company without any assets (it sold them all). The buyer is supposed to make payment (yesterday). If everyone is playing fair, the buyer just makes the payment, and the seller distributes the proceeds to its shareholders and shuts down. If the buyer decides not to pay (which seems possible) the seller is in a pickle. Why? because the seller has sold all its assets. It doesn't have the resource to pay for a litigation to force the buyer to pay. I am looking for a solve to this conundrum.

reply by an intermediary 6mos ago
from The University of Chicago in Chicago, IL, USA

In the deals I have done Seller (XYZ Inc.) retains some cash. Alternatively, XYZ shareholders can infuse capital into XYZ to fund litigation, or they can litigate directly as shareholders of XYZ. I would think that the XYZ balance sheet show A/R for the Seller Note.