What is the name of your state?What is the name of your state? California
I filed for Ch. 7 Bankruptcy in Dec. 2003 and it was granted in March 2004. In my petition for bankruptcy, I listed all of my assets to the best of my ability and recollection, including stock in 1 private company and 1 public company. In March 2004, precisely one year to the day after my bankruptcy was granted, I received notice of an adversary proceeding against me by the DOJ for "willfully and fraudulently" failing to list ownership of some stock in a privately held company. Although I had listed other stocks owned, I had completely forgotten about this stock in a company I had co-founded in 1998. I left the company in a dispute with my partner in 1999, one year after it was founded. At that time, my partner offered me $7,000 for my 49% interest in the company and I declined. Nevertheless, I never believed the company would survive. Since leaving the company in 1999, I have never attended a shareholder's meeting, never attempted to sell or transfer the stock, and never contacted the company or my ex-partner. Frankly, I put the bad memories behind me and tried to move on. I didn't even remember owning the stock 4+ years later when I filed for bankruptcy and certainly wouldn't have thought the stock was worth much had I remembered it.
The Adversary Proceeding was brought against me because the trustee was approached by my ex-partner requesting to re-purchase the stock nearly a year after my bankruptcy was granted. I believe that my ex-partner may have diluted my equity over the last 4 years (illegally) to now be around 5% of the company or less. Certainly, such a minority position in a private company (not liquid) would normally have little or no value. 90+% of the stock is held by the remaining founder and her family and the board is controlled by the founder and her family. No investor in his/her right mind would want the stock. Yet it now appears that my ex-partner has found a buyer for the company and needs my stock to complete the sale. She has offered the trustee an undisclosed sum of money for the stock, so he is seeking to have my bankruptcy overturned so he can sell the stock to my ex-partner and pay creditors. It turns out that the company had 2004 revenues of $5.8 million and it is likely that the company will sell for several million dollars. I have no idea exactly how much my 49% original holdings have been diluted (how do I find out?). The trustee won't tell me what the offer is or what percentage of stock I hold even confirm any details of the sale.
Clearly, the stock should have had little or no value at the time of my bankruptcy over 1 year ago... especially if it had been diluted by my ex-partner as I believe it has. The type of business has very few tangible assets and the value of the accounts are the primary asset. Therefore, my stock would have had little value to an outside investor except in the event of a pending sale. I had very few assets and didn't use most of my exemptions allowed for assets in my bankruptcy filing. Will the courts likely assess the stock value at the time of my filing (low) or assess its value now, when the one circumstance that would make it valuable (a sale) happens? Depending on when the stock valuation occurs, the value may pass under my exemption limit.
Is there any way that I can force the trustee to assert my minority shareholder rights and make sure that illegal dilution of my equity didn't occur? In other words, what keeps him from accepting a lowball offer that just covers my creditor debts and his fees? There is a potential to assert a 49% interest in a sale for $3-5 million... I doubt that the trustee is being offered more than a few thousand dollars and may be walking away from a huge sum of money.
I did everything I could to avoid filing for bankruptcy. If I had possessed a valuable asset that could have been sold to satisfy creditors and avoid bankruptcy, I would have gladly taken that route. The stock was forgotten, but had I remembered to list it, I still believe there was no liquid market for it at the time of my filing and it would have been declared valueless by the trustee then. What do I do?
I don't have the resources to fight this on my own, but believe there is a huge potential upside if I could find someone who is experienced in these matters who could pursue this on a contingeny fee. I have retained a bankruptcy attorney to file my response, but it appears that I also need someone experienced in corporate law to look into my minority shareholder rights and make sure the sale by the trustee is equitable.
Help!
I filed for Ch. 7 Bankruptcy in Dec. 2003 and it was granted in March 2004. In my petition for bankruptcy, I listed all of my assets to the best of my ability and recollection, including stock in 1 private company and 1 public company. In March 2004, precisely one year to the day after my bankruptcy was granted, I received notice of an adversary proceeding against me by the DOJ for "willfully and fraudulently" failing to list ownership of some stock in a privately held company. Although I had listed other stocks owned, I had completely forgotten about this stock in a company I had co-founded in 1998. I left the company in a dispute with my partner in 1999, one year after it was founded. At that time, my partner offered me $7,000 for my 49% interest in the company and I declined. Nevertheless, I never believed the company would survive. Since leaving the company in 1999, I have never attended a shareholder's meeting, never attempted to sell or transfer the stock, and never contacted the company or my ex-partner. Frankly, I put the bad memories behind me and tried to move on. I didn't even remember owning the stock 4+ years later when I filed for bankruptcy and certainly wouldn't have thought the stock was worth much had I remembered it.
The Adversary Proceeding was brought against me because the trustee was approached by my ex-partner requesting to re-purchase the stock nearly a year after my bankruptcy was granted. I believe that my ex-partner may have diluted my equity over the last 4 years (illegally) to now be around 5% of the company or less. Certainly, such a minority position in a private company (not liquid) would normally have little or no value. 90+% of the stock is held by the remaining founder and her family and the board is controlled by the founder and her family. No investor in his/her right mind would want the stock. Yet it now appears that my ex-partner has found a buyer for the company and needs my stock to complete the sale. She has offered the trustee an undisclosed sum of money for the stock, so he is seeking to have my bankruptcy overturned so he can sell the stock to my ex-partner and pay creditors. It turns out that the company had 2004 revenues of $5.8 million and it is likely that the company will sell for several million dollars. I have no idea exactly how much my 49% original holdings have been diluted (how do I find out?). The trustee won't tell me what the offer is or what percentage of stock I hold even confirm any details of the sale.
Clearly, the stock should have had little or no value at the time of my bankruptcy over 1 year ago... especially if it had been diluted by my ex-partner as I believe it has. The type of business has very few tangible assets and the value of the accounts are the primary asset. Therefore, my stock would have had little value to an outside investor except in the event of a pending sale. I had very few assets and didn't use most of my exemptions allowed for assets in my bankruptcy filing. Will the courts likely assess the stock value at the time of my filing (low) or assess its value now, when the one circumstance that would make it valuable (a sale) happens? Depending on when the stock valuation occurs, the value may pass under my exemption limit.
Is there any way that I can force the trustee to assert my minority shareholder rights and make sure that illegal dilution of my equity didn't occur? In other words, what keeps him from accepting a lowball offer that just covers my creditor debts and his fees? There is a potential to assert a 49% interest in a sale for $3-5 million... I doubt that the trustee is being offered more than a few thousand dollars and may be walking away from a huge sum of money.
I did everything I could to avoid filing for bankruptcy. If I had possessed a valuable asset that could have been sold to satisfy creditors and avoid bankruptcy, I would have gladly taken that route. The stock was forgotten, but had I remembered to list it, I still believe there was no liquid market for it at the time of my filing and it would have been declared valueless by the trustee then. What do I do?
I don't have the resources to fight this on my own, but believe there is a huge potential upside if I could find someone who is experienced in these matters who could pursue this on a contingeny fee. I have retained a bankruptcy attorney to file my response, but it appears that I also need someone experienced in corporate law to look into my minority shareholder rights and make sure the sale by the trustee is equitable.
Help!