Can I take over a business if I am their largest creditor?

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Can I take over a business if I am their largest creditor?

I own a consulting company. I was retained to guide the business from a money losing enterprise into a profitable one. Slowly that has happened. As part of my hiring contract, I was to be paid a monthly retainer. Since the company’s cash flow is always tight, they’ve missed many payments. The overdue payments now total over $150,000. They do not have the cash to pay me, although they are minimally profitable every month. They are talking about paying me $2,000/month. I am afraid they will go belly up before I get paid. If I force them to pay me now, they will fold. Are their other options?

Asked on July 7, 2011 under Business Law, Pennsylvania

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Legally, your only option is to sue them for the money they owe you, unless and only to the extent that your contract or other agreement with them provided a different recourse. (e.g. if the agreement gave your security in property or accoutns receivable, or the right to take control of the business, you may enforce those provisions.)

Of course, if you do sue (or even threaten to sue) nothing stops you and them from working something out--for example, they could agree to make you an officer of the company, to give you an ownership interest or profit participation, etc. So if you do sue to enforce your rights, you and the company may come to any settlement, including you taking over the business, that you mutually agree to.


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