Our client was in the business of importing and distributing building materials. He came to us after realizing that he may have been violating anti-dumping laws over the course of several years. The potential anti-dumping penalties were estimated to be in the millions.
Our client may have been able to pay the penalties, but it would likely have crippled their business. We suggested and implemented a somewhat risky approach.
We established a new import/export business owned by our client’s associates. The existing business stopped acquiring inventory and all future purchases went to Newco. We commissioned an appraisal of the intellectual property of the existing business (trademarks, domains, etc) and sold the IP to another legal entity. Over a period of a few months the existing business burned through its inventory, collected accounts receivable and distributed assets to its shareholders.
The government did impose a penalty and then attempted a half-hearted collection of the penalty. They only pursued the old legal entity and did not attempt to investigate the restructuring of the business.
The greatest challenge was avoiding a ‘successor liability’ argument, which would have treated the anti-dumping penalty as the liability of Newco.
Although our strategy could have failed, this case called for common sense – nothing ventured, nothing gained.
If you have any questions, or you are concerned about your business, please contact us today and we will explore all your asset protection options.