Major Investor Filing Bankruptcy

[rmccartney]

My primary investor is filing for bankruptcy, and is interested in finding a replacement investor. In all of my searching, I have only found advice on how founders handle company bankruptcy, but not how to handle an insolvent shareholder. Any tips, intros, or advice on the topic?

[davismwfl]

Talk to an attorney. There are lots of little details that need to be understood. For the investor the shares are an "asset" at least as the court will see them and they will potentially be up for liquidation. But there are a bunch of details around that, for example what chapter of bankruptcy? How long ago the investment was done etc.

You want to have an attorney help you through this, it won't take a lot of money or time but get the advice.

[katttrrr]

It's equally important to do the research yourself as well so that you can make more educated decisions with your attorney. I would, at least, read your local state laws in regards to this subject.

[davismwfl]

Bankruptcy is a federal statue not state. And the law is extremely complex. I don't disagree people should be informed but this requires an attorney to properly prepare.

If the investment was debt equity versus a priced round that also drasticly affects the options available.

OP please reach out to an attorney, and ask lots of questions. And make sure they understand the details of how the investment was done etc.

IANAL but there are a couple of ways this could work out in your Companies favor.

[rmccartney]

Thank you! This is helpful. Will discuss further with Cooley. They weren’t too stressed about it, but since the investor is getting more motivated to sell, I’m trying to best educate myself