Share this Page URL

Closing up Shop > Closing up Shop - Pg. 80

Financing a Game Development Venture 80 · If, despite your best efforts to "work out" your debts, your company nevertheless subsequently ends up in bankruptcy, some payments to creditors made immediately before bankruptcy may have to be returned to the debtor's estate (the pool of assets remaining with the bankrupt com- pany). This is due to the rule of preference : the court does not want you paying off your friends and then freezing everyone else out with a bankruptcy filing; they want the assets distributed pro rata in accordance with the bankruptcy rules. · You will have a lot of people expecting you to "do the right thing" (see next section). · Your latitude in deciding who gets paid may result in a spurned creditor (or even an equity holder) suing you as an individual to try to recover. Despite corporate limitations of liability, such a suit would nevertheless be a nuisance and a stressor. How to Liquidate Your Company If you decide to do some or all of the wind-up yourself, remember three things: · The board of directors of an insolvent company owes its duty of loyalty to the creditors, not the owners. · Creditors are paid before equity holders. · Under certain circumstances management can legally pay some creditors and not others.