Senate committee hears testimony on bill to modernize Delaware’s assignment-for-benefit-of-creditors law

A Delaware Senate committee on SB627 heard experts describe a state update to the assignment-for-benefit-of-creditors (ABC) process, a commonly used alternative to federal bankruptcy for financially distressed businesses.

Jane Sternikeen, legislative counsel for the Uniform Law Commission, testified she supported SB627 to enact the Uniform Assignment for Benefit of Creditors Act and described the uniform act's multi-year drafting process and early state adoptions. "I'm here today in support of SB627 to enact the Uniform Assignment for Benefit of Creditors Act," Sternikeen told the committee, noting the act was finalized in 2025 and has already been enacted elsewhere.

A commercial law attorney who chaired the Delaware State Bar Association (DSBA) commercial law committee outlined the DSBA's involvement in tailoring the uniform text for Delaware. The attorney said the bill preserves optional judicial review while adding a new procedural requirement: "we mandated that you open a case in the Court of Chancery by filing a petition," which the witness argued would create transparency and ensure a ready forum if court relief is needed.

Senator Richardson pressed witnesses on whether adopting the uniform act would help Delaware’s reputation as business-friendly. The commercial law attorney said the law would provide clarity missing from a statute that has roots in the 19th century and could make Delaware a more attractive place for some insolvency cases that might otherwise go to other states.

Supporters told the committee ABCs can be faster and less costly than Chapter 7 or Chapter 11 bankruptcy and that a modern statute would reduce reliance on a patchwork of ad hoc solutions. The witnesses said adoption would allow courts to consult official Uniform Law Commission comments in interpreting the statute.

Committee members did not record a committee vote on SB627 during the hearing. The chair thanked the witnesses and closed the meeting; members moved to adjourn and the meeting ended with legislation to be circulated for signature.