What are the laws governing corporate insolvency?
In Hawaii, corporate insolvency is regulated by a set of laws that are designed to protect creditors, debtors, and shareholders during insolvency proceedings. Corporate insolvency occurs when a company can no longer pay its debts, and statutory intervention is necessary in order to resolve the situation and protect the interests of the various parties involved. Under the Bankruptcy Code, the procedures for corporate insolvency are divided into three primary categories: liquidation, reorganization, and receivership. In liquidation scenarios, a corporation’s assets are sold off in order to provide a monetary return to creditors. Reorganizations involve restructuring the company’s debt in order to make repayment easier. Receivership involves the appointment of an outside party to take control of a company during insolvency in order to protect the assets of the creditors and shareholders. In addition to the Bankruptcy Code, the Uniform Commercial Code (UCC) is also influential in corporate insolvency cases. The UCC deals with the procedures and regulations governing commercial transactions, and can be used to protect creditors from fraudulent activities by businesses. Under Hawaii state law, certain additional protections for corporate insolvency are available. For example, in Hawaii, shareholders can petition a court for an involuntary dissolution of a company if at least one-third of the shareholders want to dissolve the business due to corporate insolvency. This is designed to protect the remaining shareholders from being responsible for the debts of the insolvent corporation.
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