Improbability
in Determining When a Firm is Insolvent
A firm, whether it be a LLC, an LLP
or a general partnership, may not make distributions to its owners when it is
insolvent. If and to the extent distributions
are made when the firm is insolvent, they may be “clawed back” into the firm
for satisfaction of creditor claims.
According to a story published today
in Law360, a settlement of the claims against the partners has been
reached. As reported, there were
alternative dates at which a determination of insolvency could be made. The
amount of the settlement is less than the full amount that would be due if the earlier
date were used, but more than the amount that would be due if the later date
were used.
The article is Sedgwick
Strikes Clawback Deal With Former Equity Partners, by Emma Cueto, Law360
(June 7, 2019).
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