What is the process for corporate insolvency?

In California, there are a few key steps that are taken in order to process corporate insolvency. The first step is the filing of an involuntary petition by one or more creditors against the corporation. This petition can then be reviewed by the court to determine if the business is indeed unable to pay its debts. If the court determines that the company is not able to pay its debts, then the court will appoint a Trustee who will be responsible for overseeing the insolvency process. The Trustee will then start the liquidation process, which involves selling off the company’s assets in order to pay off creditors and any taxes that may be owed to the government. After the assets have been liquidated, the Trustee will then distribute the proceeds to the creditors on a priority basis, beginning with secured creditors such as banks. Priority creditors such as employees, suppliers, and government agencies will be paid after unsecured creditors. The Trustee will also determine if there is any value left after all of the creditors have been paid off. If there is, it will be distributed to the shareholders according to the company’s Articles of Incorporation. Once all of the creditors have been paid off and any remaining value has been distributed, the corporate insolvency process will be complete.

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What is the process for corporate insolvency?

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