A company is a separate entity from an individual. A company is a legalised body, meaning that it can sue and be sued. Today, the issue of getting into debts does not only imply to individuals. Companies also run into serious debts owed to so many individuals. Therefore, if you are making a claim against a company, you will realise that there are so many others making such claims over the same thing you are laying claims on, and this is common when making claims on companies than on private individuals.
When a Corporation Enters Into Economic Difficulty
The financial existence of a corporation will depend on its business standing and the remaining capital that it possesses. Just like every individual will seek for a loan, a corporation too can get into debts and if the corporation fails to redeem it debts in a situation of economic crises, the debts would further increase. Remember that the taxes of the corporation are just a fraction of what is owed by the corporation to others.
With the advent of economic hardship, a corporation will still want to maintain its feet in doing business. This means that its main concern should be to pay its workers. When this is taken as main concern, the corporation may fail to meet up with other financial obligations such as paying its taxes. This has resulted in state as well as federal administration to use the same means of collecting taxes from individual on corporations.
When this is done, the administration will have a power or legal right over the assets of the corporation and this will be sold to financiers who are willing and able to redeem the debts of the corporation. Whoever pays for the debts of the corporation to the administration has the right to recover what he has paid from the corporation. Keep in mind that this is a form of business in which the investor must make profits on what he has invested.
The distinction in having a lien over the assets of a corporation to that of an individual is found in the incidence of liquidation. It is normal that any creditor will seek legal redress to have his money. But the principal debt plus any other thing added to it that has to be gotten from pursuing a corporation that is in debts is not something that will be easy.
However, it should be noted that if you have legal authority over the assets of a distressed corporation, and if the corporation is getting into liquidation, what is owed to you is secure. But you must know that you will be faced with so many other claimants seeking redress against the corporation. Remember this is very possible because a corporation is more likely to deal with so many people than an individual.
The Advantages of Insolvency
Most insolvency proceedings will restrict the obligations of an ailing corporation to pay interest. It should be noted that in a Supreme Court hearing, it was decided that an owner of a non-consensual claim that is more than protected like a tax lien will be entitled to interests, but will not be entitled to other charges except there is an accord that these should be paid. This will apply equally to federal lien holders. But Congress has decided that a holder of a state lien must be entitled to interest as well as any justifiable fees and charges provided that these are greater than the claim.
One further difficulty to the lien holder is that in some cases, the corporation may invoke the law relating to the limitation period to bring an action against it. If this is successful, the claimant will be stopped or prevented from bringing an action against the corporation, but this will also depend on the facts presented before the courts. If the asset over which there is a lien is lesser than the value of claim, the claimant is found to have been under protected and will forfeit any interest on the claim.
If you own a lien over a corporation, take note that you will be faced with competing interests either from different claimants or even from the law itself even if your claim has a right of way over those of others. This is a hazard which you must be prepared to deal with if what you stand to benefit is of great value.