Brought to You by the Makers of the UCC: The Uniform Assignment for Benefit of Creditors Act

On October 20^th, the Uniform Law Commission (“ULC”) approved the Uniform Assignment for Benefit of Creditors Act (“Uniform ABC Act”).¹ This pivotal legislation is designed to modernize and standardize state-level liquidation procedures, offering clarity, consistency, and uniformity to a mechanism frequently utilized by financially distressed businesses.

The Uniform Law Commission and its Mission

The ULC, also known as the National Conference of Commissioners on Uniform State Laws (“NCCUSL”), is an organization that has been providing states with non-partisan, well-conceived, and well-drafted legislation for over 134 years.² The primary goal of the ULC is to bring clarity and stability to critical areas of state statutory law.

The ULC is responsible for having promulgated more than 300 uniform laws and model acts on numerous subjects, nearly 175 of which are currently in effect in at least some jurisdictions. It’s best known for the Uniform Commercial Code.³

ULC members are lawyers, judges, legislators, legislative staff, and law professors appointed by state governments, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. These commissioners research, draft, and promote the enactment of uniform state laws in areas where uniformity is both desirable and practical. By creating consistent rules and procedures across states that still reflect the diverse experiences of each jurisdiction, the ULC strengthens the federal system. Its work facilitates economic development, helps keep state law current by addressing timely legal issues, and reduces the complications businesses and individuals face when dealing with different laws across state lines. Importantly, commissioners volunteer thousands of hours of their time and expertise without compensation, and the drafting process is uniquely open, incorporating input from legal experts and advisors representing various interests. The Uniform ABC Act drafting committee included participants from key states such as California, Delaware, and Florida, ensuring diverse perspectives were considered.⁴

Assignments for the Benefit of Creditors: A Varied Landscape

An assignment for the benefit of creditors (“ABC”) is a voluntary, debtor-initiated state law alternative to federal bankruptcy, state receiverships, and voluntary workouts. It functions as a liquidation procedure: an “assignor” (usually a company in financial distress) transfers all of its assets to an “assignee,” a fiduciary who then liquidates those assets and distributes the proceeds to the assignor’s creditors. The assignment creates a fiduciary relationship, with creditors as the beneficiaries.

Historically, the laws governing ABCs have varied widely from state to state. The process for carrying out an assignment is fundamentally different depending on the state law governing it:

• Statutory vs. Common Law Approaches: In some states, such as Florida and New Jersey, assignments are governed by comprehensive statutes. Conversely, in states like California and Illinois, assignments are primarily or completely governed by common law. In many common law states, the parties must rely on antiquated laws or general legal principles, as their ABC statutes were repealed or have not been recently modernized.
• Court Supervision: The level of judicial oversight is a major distinction. In states with statutory schemes, such as Florida and New Jersey, assignments are often carried out under the supervision of a court, giving them a feel similar to Chapter 7 bankruptcy. Delaware also provides for court-supervised assignments, governed by the Chancery Courts, and has seen an increasing trend of debtors electing to use this process. In contrast, states relying on common law, like California and Illinois, typically conduct assignments with little or no court supervision.

Despite these differences, ABCs are generally seen as a cheaper and more flexible option than federal bankruptcy. However, the existing variation in laws has complicated their use, particularly when a business’s assets are located in multiple states or when the governing state law is underdeveloped. The Uniform ABC Act addresses these complexities by providing a roadmap for practitioners and modernizing outdated statutes.

Introducing Clarity: Key Features of the Uniform ABC Act

The Uniform ABC Act is intended to encourage the use of ABCs by improving the clarity and integrity of the law. It sets out a straightforward process for commencing and completing an assignment and provides a clear scheme for distributions to creditors.

1. Streamlined Process and Judicial Role: The Uniform ABC Act provides mechanisms for judicial involvement but crucially does not mandate or specifically contemplate routine court supervision. This feature is appealing to all states, whether they currently utilize court-supervised or non-supervised assignments.
   • While assignments made under the laws of states like Florida, New Jersey, and Delaware are court-supervised, states adopting the Uniform ABC Act can integrate this new uniform law while continuing to use their established judicial structures for resolving disputes or providing instructions. Conversely, in states like California and Illinois that typically operate outside judicial supervision, the Uniform ABC Act would provide clear statutory guidance where currently only common law or antiquated provisions exist. The Uniform ABC Act will displace common law assignment procedures in the adopting state.

2. Assignee Duties and Qualifications: The Uniform ABC Act clearly establishes the assignee as a fiduciary to the assignment estate for the benefit of creditors. The assignee’s core fiduciary duties include the duty of loyalty (managing the assignment in good faith), maximizing distributions, and winding up the assignment in a manner compatible with the best interests of the assignment estate and creditors.The act sets strict eligibility requirements for assignees, requiring that they are not a creditor, affiliate, or insider of the assignor or an affiliate/insider of a creditor, nor can they hold an equity interest in the assignor (with exceptions for noncontrolling interests in publicly traded companies).
3. Assignee Powers (Lien Creditor Status): A key power granted to the assignee under the Uniform ABC Act is the right to avoid a transfer or the incurrence of an obligation that a creditor could have avoided under other law had the assignment not been made. This power is exclusive to the assignee once a creditor submits a proof of claim.To enforce this power and establish priority, the assignee acquires the status of a lien creditor regarding interests in personal property or fixtures, and the status of a bona fide purchaser regarding interests in real property. This grant of status is critical for securing the assigned assets against unperfected liens, a role traditionally recognized under state UCC laws but often lacking comprehensive procedural backing in common law states like California and Illinois. The Uniform ABC Act provides that the assignee’s lien secures the claims of creditors entitled to distributions.
4. Claims Process and Creditor Jurisdiction: The Uniform ABC Act mandates a clear process for creditors to submit a proof of claim, establishing a claims bar date that must be between 90 and 210 days after the effective date of the assignment agreement. The submission of a proof of claim has significant consequences: it constitutes the creditor’s consent to the jurisdiction of the court (if judicial action is sought) and assigns to the assignee of any right the creditor has to bring a voidable transaction action related to the claim. This concentration of avoidance power in the assignee contrasts with common law approaches, where creditors might retain independent avoidance rights.When a claim is disputed, the assignee must create a dollar-for-dollar reserve for the estimated distribution on that claim. If the dispute cannot be resolved consensually, the assignee may commence a court proceeding to disallow the claim before final distribution.
5. Interstate Matters and Jurisdiction: The Uniform ABC Act directly addresses the complications of multi-state assignments. It generally requires that an assignment made under the law of another state must be recognized and enforced if the result would be substantially similar to an assignment made under the Uniform ABC Act.The Uniform ABC Act provides specific scope rules dictating when the act applies: generally, when the assignor organization’s principal place of business is in the enacting state, or when its internal affairs are governed by the law of the enacting state. Notably, the act clarifies that the assignee’s jurisdiction of organization or principal place of business is not itself a basis for jurisdiction for an assignment. This provision directly targets forum shopping trends seen in jurisdictions like Delaware. For instance, a Delaware Chancery Court case found a lack of subject matter jurisdiction where an Illinois corporation commenced an assignment in Delaware, and the sole connection was that the assignee was a Delaware entity.⁵
6. Priority of Distributions: The Uniform ABC Act sets forth a clear priority scheme for distributions from the assignment estate. Distributions follow this general order, after payments to “protected secured creditors” (unless otherwise agreed):
   • Necessary costs of administration (assignee fees, post-assignment taxes, etc.).
7. Claims entitled to priority under federal law (e.g., 31 U.S.C. Section 3713, giving federal debts priority when an insolvent person makes a voluntary assignment).
8. Wages, salaries, or commissions earned within a specific period (maximum 180 days) before the assignment date, limited to the greater of the federal bankruptcy priority claim amount or the state non-bankruptcy priority amount.
9. Unsecured claims entitled to priority under other state law.
10. Unsecured claims not entitled to priority.This structure provides needed consistency, especially for the distribution hierarchy, which is often subject to varied state statutes or common law, such as the priority wage claim variations seen in states like California.

Conclusion

The Uniform ABC Act represents a significant step toward unifying state law regarding business liquidation. By providing statutory standardization, detailed fiduciary duties, clear claims procedures, and a defined priority scheme, the ULC intends for the Uniform ABC Act to provide greater clarity, consistency, and uniformity to the assignment process across the fifty states. The Uniform ABC Act gives states the tools needed to modernize underdeveloped or antiquated statutes, offering a robust alternative to federal bankruptcy.

What Happens Next?

Alabama has already introduced a bill to adopt the Uniform ABC Act. 2026 AL S.B. 15. And that’s what happens next: The ULC doesn’t have the power to enforce anything. Its role ends with drafting and approving. Now, it’s up to individual states to decide whether to introduce the Uniform ABC Act into their legislative sessions. That means committee hearings, amendments, debates, and perhaps adoption.

Stakeholders (think bar associations, creditor groups, trustees, business advocates) may weigh in. Supporters will argue that the Uniform ABC Act brings clarity and consistency. Critics, if any, might argue about local preferences or procedural nuances. This is where things can slow down or speed up, depending on the political and economic climate in a given state.

[1] You can get a copy of the Uniform ABC Act at https://www.uniformlaws.org/committees/community-home?communitykey=b7e5e644-b4b2-44eb-acbc-019859883add.
[2] More information about the ULC can be found here: https://www.uniformlaws.org/aboutulc/overview.
[3] See Jonathan Friedland, What the **** Is the Uniform Commercial Code? (DailyDAC, September 15, 2025), available at https://www.financialpoise.com/what-the-is-the-uniform-commercial-code/ for more of an overview.
[4] Laura Coordes, professor of law at the Sandra Day O’Connor College of Law at Arizona State University, served as the official reporter for the Uniform Law Commission’s Drafting Committee on Assignments for the Benefit of Creditors. Jonathan Friedland, the publisher of The National Law Review, DailyDAC, and Financial Poise, a practicing attorney representing assignees and assignors, and the principal author and editor in chief of Strategic Alternatives for and Against Distressed Businesses, a 2,000 page treatise published annually by Thomson Reuters, sat as an observer to the Drafting Committee.
[5] In re Vernon Hills Serv. Co., 2024 Del. Ch. C.A. No. 2021-0783 (Mar. 28, 2024).