What are the laws governing corporate insolvency?
In Kansas, corporate insolvency is governed by a set of state and federal laws. In general, corporate insolvency occurs when a corporation is no longer able to pay its debts, which can happen for many reasons, such as a decrease in revenue or an increase in expenses. At the state level, Kansas has adopted the Uniform Fraudulent Transfer Act. This act allows creditors to pursue legal action against individuals and businesses who attempt to avoid paying their debts through transferring assets to third parties. The federal Bankruptcy Code also applies in Kansas. It provides several procedures under which insolvent corporations can seek to reorganize their debts and be relieved of them. The two main procedures are Chapter 11 Reorganization and Chapter 7 Liquidation. Chapter 11 Reorganization allows corporations to remain in business while they come up with a plan to reorganize their debts and pay creditors. Chapter 7 Liquidation, on the other hand, allows corporations to be dissolved, and their assets sold and distributed among creditors. In either case, a court—typically the U.S. Bankruptcy Court—must approve the plan. After all debts are paid, the remaining assets are distributed to shareholders. In addition to these two main procedures, corporations may also choose to pursue debt settlement with creditors, in which case a settlement agreement is reached between the two parties. In summary, corporate insolvency in Kansas is governed by a combination of state and federal laws. These laws provide various options for dealing with insolvent corporations, such as reorganization or liquidation, as well as debt settlement.
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