Delaware’s New ABC Act: A Faster, Flexible Restructuring Alternative

On June 10, 2026, Delaware enacted the Uniform Assignment for Benefit of Creditors Act (the “Act”). This legislation adopts, with only minor modifications, the Uniform ABC Act authored by the Uniform Law Commission. The Act replaces Delaware’s prior ABC statute—which was originally adopted in 1875 and has not been revised since 1953—with a comprehensive, modern framework. Delaware is now the sixth state to adopt a version of the Uniform Act, which has previously been enacted in Alabama, Arizona, Iowa, Nebraska, and Utah and introduced in Colorado, Oklahoma, and West Virginia.

Delaware’s enactment is expected to have extensive practical impacts given the substantial number of companies incorporated in the state. Delaware’s prior ABC statute was burdensome—requiring significant court involvement, posting a bond, asset appraisals, and formal inventories—and was thus underutilized. By providing greater clarity and predictability than the prior outdated framework, the Act’s modernization of Delaware’s ABC process opens up a potentially attractive new restructuring alternative for distressed companies and their lenders.

What Is an ABC?

An assignment for benefit of creditors (“ABC”) is an efficient and flexible state law mechanism to wind up a distressed business. In an ABC, a financially distressed business (the “assignor”) transfers all of its assets to an “assignee,” who holds the assets in trust for the benefit of the assignee’s creditors. The assignee liquidates the business’s assets and distributes the proceeds to creditors toward payment of their claims against the assignor. Proceeds are distributed in the order of legal priority under state law.

Generally, ABCs can address all property of the assignor, including tangible and intangible real and personal property, leasehold interests, causes of action, bank accounts, intellectual property, and contract rights.

ABCs as a Valuable Restructuring Tool

ABCs are an alternative to federal bankruptcy and state or federal receivership proceedings, and in many cases, an ABC will be more flexible, quicker, and less costly than those alternatives. Specifically, an ABC may be an improvement on other wind-down alternatives in several significant ways:

• Fiduciary protections for creditors. The assignee owes fiduciary duties to the assignment estate for the benefit of creditors, including duties of loyalty, reasonable care to maximize distributions, and winding up the assignment in a manner compatible with the best interests of the estate and creditors.
• Privacy and confidentiality. Unlike bankruptcy, where all assets, liabilities, preferences, and other information must be disclosed in the public record, ABCs allow for greater confidentiality. This can provide a competitive advantage by protecting the identities of contracting parties, creditors, and proprietary information.
• No creditors’ committees. Unlike Chapter 11 bankruptcy, where unsecured creditors may be appointed to form a creditors’ committee with power to investigate the debtor and participate in plan formulation, ABCs do not require formation of creditors’ committees. This simplifies the process and reduces costs associated with committee professionals.
• Protection against unsecured creditor liens. While ABCs do not provide an automatic stay, unsecured creditors are unable to perfect any liens after the assignment commences because the assets are transferred away from the assignor to the assignee.
• Cost savings. ABCs can be significantly less expensive than bankruptcy proceedings. One study on Florida ABCs, for example, found that they typically cost approximately half the cost of a Chapter 11 bankruptcy case.¹
• Protection for Directors and Officers. ABCs give a distressed company’s officers and directors distance between management and the sales process by transferring assets to an independent, experienced third-party assignee to conduct an orderly wind-down, thereby shielding the debtor’s fiduciaries from potential liability in connection with the disposition of company assets.

Key Features of the New Law

Delaware’s new ABC law provides substantial improvements over the prior law. The framework under Delaware’s former ABC statute was relatively sparse, comprising only a few sections covering inventory filing, appointment of appraisers, bonding, accounts, removal, and preferential assignments. Practitioners relied heavily on common law trust principles and the Court of Chancery’s equitable powers to fill in the gaps, making the process cumbersome relative to other jurisdictions.

The new Act replaces the prior ABC statute’s patchwork and reliance on significant court supervision with a comprehensive statutory roadmap that increases flexibility and efficiency and lowers costs. The Act implements the Uniform ABC Act with some Delaware-specific tweaks by providing:

• Clear eligibility requirements for assignors and qualifications for assignees, and defined duties for each;
• The assignor’s ability to select its own assignee, which allows the assignor to choose a fiduciary whose approach and expertise align with its wind-down objectives and to understand the assignee’s strategy before the process commences;
• Required contents for the assignment agreement, which must be a signed record describing assigned assets, distribution provisions, and assignee fees;
• Procedures for notifying creditors within 30 days of the assignment;
• A claims process with a minimum 90-day period for creditors to submit proofs of claim;
• A priority-based distribution waterfall for secured and unsecured creditors;
• Broad assignee powers, including the ability to operate the business, incur debt, settle claims, and avoid certain pre-assignment transfers;
• A proof of claim bar date of at least 90 days;
• Notices to holders of disputed, contingent, or unliquidated claims, employees, and contract counterparties within 90 days of assignment;
• Limited Court of Chancery oversight, with assignees required to file a petition within 14 days of the assignment;
• Interstate recognition provisions and the ability to appoint ancillary assignees for out-of-state assets; and
• Court of Chancery authorization to communicate with other courts before which related assignment proceedings have been commenced.

Practical Implications for Distressed Companies

If your distressed Delaware company is considering a restructuring, the Act offers significant advantages worth considering. An ABC can now be initiated faster and with fewer hurdles than before, and with bond and appraisal requirements eliminated, upfront costs and delays are meaningfully reduced. Critically, the Act provides clear authority for the assignee to operate the business, incur debt, settle claims, and engage in pre-assignment planning activities. By allowing assignees to plan assignment strategies prior to assignment, going concern value is more likely to be preserved while assets are marketed and transferred to a buyer. An ABC is thus not just a liquidation tool, but a viable path for preserving business value through a structured sale. Assets can be marketed as a going concern without the rigid procedural requirements of bankruptcy court approval, making ABCs particularly attractive for time-sensitive transactions.

For companies operating across multiple jurisdictions, the Act provides an additional strategic benefit. Delaware will recognize and enforce ABCs made under another state’s laws if the result would be substantially similar to the result under Delaware law. As more states adopt the Uniform ABC Act, this cross-jurisdictional flexibility will become increasingly valuable.

Before pursuing an ABC, you should consult counsel to evaluate whether it is the right tool for your circumstances. ABCs have certain limitations: there is no automatic stay, shareholder and board approvals may still be required to transfer all or substantially all assets, secured creditor consent may be required to transfer encumbered assets free and clear of liens, and contracts cannot be assumed or assigned without counterparty consent. If your company has an immediate need for an automatic stay, complex corporate structures, a desire to transfer non-assignable contracts, or significant contingent liabilities, bankruptcy may be preferable.

Conclusion

The Uniform Act is a relatively new model statute, and the Delaware ABC Act has only just overhauled the preexisting law, so it remains to be seen how it will be implemented in practice. Nevertheless, Delaware’s adoption represents a significant enhancement to the restructuring toolkit available to distressed businesses. Companies should consider ABCs as a viable, cost-effective alternative to bankruptcy, particularly where speed, flexibility, and cooperation with creditors are priorities.

¹ Jessica G. McKinlay, Assignments for the Benefit of Creditors as an Alternative to Bankruptcy Proceedings, 9 BUS. ENTREPRENEURSHIP & TAX L. REV. 74, 99 (2025).

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Jennifer Taylor, an O’Melveny partner licensed to practice law in California; Matthew P. Kremer, an O’Melveny partner licensed to practice law in New York; Nicole Molner, an O’Melveny counsel licensed to practice law in New York; and Sophie Putrim, an O’Melveny law clerk, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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