Asset Recovery

The State of Delaware is considered one of the most attractive and business-friendly corporate havens in the United States. Multinationals, publicly traded companies and international entrepreneurs incorporate in Delaware. Since beneficiaries of these companies are mostly located outside the State and often abroad, operational activities and much needed financial services can be established where the company wants and thus in the most appropriate jurisdiction. In general, cross-border operations are straightforward. Sometimes however, things go wrong, and financial losses occur. To regain control over blocked or lost assets and financial holdings, asset recovery plans must be professionally designed and followed.

Identical to most other common law jurisdictions, the State of Delaware confirms the principle of corporate personality as a standalone legal person isolated from shareholders, management and employees. Consequently, the business is an artificial yet separated legal entity. In matter of asset recovery it is important to realize that this separation goes both ways and that beneficiaries of a lapsed, dormant, closed or liquidated Delaware company cannot assume control over the corporate assets. Reactivation and restoration procedures are often required to allow the company to reclaim its frozen or lost assets.  

Delaware companies have an international character and global audience. These companies may engage in cross-border activities and hold bank accounts in different jurisdictions. It often happens that a Delaware company, its corporate bank account and the ultimate beneficial owner reside in different countries. This corporate diversification serves a purpose but creates challenges in matters of cross-border and international asset recovery. The latter is not something that happens frequently, but when it does, it can have severe consequences.

The offshore financial industry collaborates with non-resident customers, location independent consultants and entrepreneurs, and offshore companies. This alternative customer and risk profile has an impact on the local economy and its fiscal status. As such, international organizations, regulators and domestic lawmakers impose strict rules on financial institutions dealing with these type of customers. For example, the Financial Action Task Force (FATF) formulates recommendations on dealing with money laundering and threats of terrorism financing, and the US Based Financial Crimes Enforcement Network (FinCEN) protects abuse of global US Dollar transactions. Both organizations have a strong impact on cross-border financial activities and the reporting requirements for international banks. Regulatory violations can lead to sanctions that include a forced closure of the financial institution.

Bank failure and investment fraud happens unexpectedly. Most Delaware companies use their bank account for daily operations, while excess finances are invested for a purpose. The common element is that these financial resources must be returned to its rightful owner eventually. Insolvency and fraud leave scars with creditors. Therefore, the unforeseen even must be mitigated and the appropriate asset recovery strategy must be formulated. Asset recovery and insolvency proceedings have a singular character. Payments to creditors can only be made once and when the general pool of assets available for distribution purposes is empty, subordinated, forgotten or silent creditors have no further right to recourse. This makes it mission critical to be first in line when a proof of debt is requested by the administrator or liquidator to determine whether payments can be made.

Prior to the approval of a liquidation procedure, the principle of pari passu can be set aside. As such, creditors who are able to participate in insurance or deposit protection, or who achieve a settlement with an asset holder can legally circumvent the principle that the distribution of assets only takes place in equal proportion to the size of the claim.

Delaware Asset Recovery

When funds are at risk, Delaware companies should seek professional guidance to get their assets unblocked and returned. It cannot be stressed enough that recovery proceedings do not allow for second chances and the available liquidity available for distribution is written down by insurance claims, legitimate out of court settlements and the payment of claims of priority. What is left is paid via a general pool of unsecured assets and liquidity to creditors on an equal basis.

To protect the blocked assets of a Delaware company, mitigate risk and prevent assets from disappearing, creditors must establish an asset recovery plan that is based on reliable and proven strategies. History shows that in bank failure for example, approved creditors who qualify for deposit protection schemes have the best changes for a full recovery. Even when their outstanding deposit exceeds the maximum insured amount. However, chances for total repayment are increased when the creditor follows several asset recovery strategies.

Depending on the underlying problems that triggered the obstruction of access to funds, creditors can combine civil action with criminal complaints. Civil asset recovery may involve the international courts but can also include out of court actions. Several jurisdictions allow civil parties to file their claim for damages in criminal actions initiated by public authorities.

Delaware companies and beneficiaries in fear of losing access to their assets can contact us by completing the contact form on this page. For purposes of efficiency and to justify multiple routes of asset recovery, it is preferred to combine creditors with identical claims and initiate group efforts. For more information, contact us via the form below.  

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