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Last RightsLiquidating a Company$

Ben S. Branch, Hugh M. Ray, and Robin Russell

Print publication date: 2007

Print ISBN-13: 9780195306989

Published to Oxford Scholarship Online: May 2007

DOI: 10.1093/acprof:oso/9780195306989.001.0001

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(p.208) Appendix 3 Asset Category Definitions

(p.208) Appendix 3 Asset Category Definitions

Last Rights
Oxford University Press

account—a right to payment of a monetary obligation, whether or not earned by performance, (i) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of; (ii) for services rendered or to be rendered; (iii) for a policy of insurance issued or to be issued; (iv) for a secondary obligation incurred or to be incurred (i.e., obligation of a person who (a) has a stake in the proper enforcement of a security interest because he/she has an obligation to pay the secured debt (i.e., a guarantor) or (b) has a right of recourse against the debtor or another obligor with respect to an obligation secured by the collateral); (v) for energy provided or to be provided; (vi) for the use or hire of a vessel under a charter or other contract; (vii) arising out of the use of a credit or charge card or information contained on or for use with the card; (viii) as winnings in a lottery or other game of chance operated or sponsored by a state, governmental unit of a state, or person licensed or authorized to operate the game by a state or government unit of a state; or (ix) health‐care‐insurance receivables (i.e, an interest in or claim under a policy of insurance that is a right to payment of a monetary obligation for health‐care goods or services provided).

aircraft—any vehicle or structure intended for use as a means of transporting passengers or goods in the air, including airplanes, helicopters, blimps, hot‐air balloons, and all engines and avionics attached thereto.

boats and vessels—various types of structures that float on water, including boats, barges, dredges, and offshore drilling rigs.

chattel paper—a record or records that evidence both a monetary obligation and a security interest in specific goods, a security interest in specific goods and software used in the goods, a security interest in specific goods and license of software used in the goods, a lease of specific (p.209) goods, or a lease of specific goods and license of software used in the goods. The monetary obligation is secured by the goods or owed under a lease of the goods and includes a monetary obligation with respect to software used in the goods. A record is inscribed on a tangible medium or stored in an electronic or other medium and is retrievable in perceivable form. If records of a transaction include an instrument or series of instruments, the group of records constitutes chattel paper. The category includes retail installment sales contracts, sales contracts and security agreements, conditional sales contracts, chattel mortgages, and personal property leases. It also includes car‐rental agreements by a car‐rental agency, and promissory notes and security agreements evidencing credit sales of goods by an appliance dealer.

copyright—a right granted by the federal government under copyright law to the creator or owner of an original work of authorship (e.g., a painting, play, book, database, advertisement, certain types of computer programs) that is in a tangible medium of expression (e.g., recorded on magnetic tape, written or typed on paper, etc.).

deposit accounts—demand, time, savings, passbook, or similar accounts maintained with a bank. The category includes a nonnegotiable certificate of deposit, which is a written document issued by a bank, savings and loan association, credit union, or similar financial organization that (i) states on its face that it is a certificate of deposit or receipt for a book entry; (ii) contains an acknowledgment that a sum of money has been received by the issuer, with an express or implied agreement that the issuer will repay the sum of money; and (iii) is not a negotiable instrument. The category does not include investment property or accounts evidenced by an instrument.

documents: warehouse receipts and bills of lading—receipts issued by a person engaged in the business of storing, transporting, or forwarding goods for hire, which act as evidence of title to such goods. A warehouse receipt is a document that describes goods stored in a warehouse and, generally, (i) entitles the person in possession of it to receive, hold, and dispose of the document and the goods that it covers and (ii) is a commitment by the issuer to deliver the described goods to the owner of the receipt and to use reasonable care to protect the goods from damage. A bill of lading is a document of title issued by a carrier in connection with the shipment of goods. It enables a remote buyer and a remote seller to consummate a transaction with limited risk to either party.

equipment—all tangible personal property used or bought for use primarily in business, including use in farming operations or in a profession (e.g., computers, file cabinets, etc.). On a balance sheet, this is typically noted as FF&E.

farm products—goods other than standing timber that are used in a farming operation and that are (i) crops grown, growing, or to be grown, including crops (p.210) produced on trees, vines, and bushes; and aquatic goods produced in aquacultural operations; (ii) livestock, born or unborn, including aquatic goods produced in aquacultural operations; (iii) supplies used or produced in a farming operation; or (iv) products of crops or livestock in their unmanufactured states.

fixtures—goods so tied to particular real estate that the law considers them to be part of the real estate.

general intangibles—any personal property (including things in action) other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter‐of‐credit rights, letters of credit, money, and oil, gas, or other minerals before extraction. The category includes payment intangibles and software. Payment intangible is the account debtor's principal monetary obligation. Software is a computer program and any supporting information provided in connection with a transaction relating to the program. The category does not include a computer program that is included in the definition of goods. The category is quite broad and includes things such as the following items:

  1.  intellectual property (i.e., patents, trademarks and copyrights)

  2.  goodwill

  3.  literary rights

  4.  rights to the repayment of unsecured loans not evidenced by promissory notes

  5.  rights to payment to dealers for retroactive volume discounts

  6.  assignments of beneficial interests in trusts

  7.  interest in a limited liability company

  8.  tax refunds

  9.  rights to performance

  10.  payments under the federal payment‐in‐kind program

  11.  payments under non‐negotiable promissory notes

  12.  reversionary interests under true leases of goods

  13.  customer lists and trade names

  14.  unearned extended warranty charges

  15.  newsletters

  16.  membership in an agricultural coop

  17.  interest in an annuity

instrument—any negotiable or other instrument that evidences a right to the payment of a monetary obligation. It is not itself a security agreement or lease and is of a type that in the ordinary course of business is transferred by delivery with any necessary endorsement or assignment. The category does not include (i) investment property, (ii) letters of credit, (iii) writings that evidence a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card, or (iv) nonnegotiable certificates of deposit. Examples of negotiable instruments include (i) a promissory note, (ii) a draft, (iii) a negotiable certificate of deposit, and (iv) a check.

(p.211) inventory—goods leased by a person as lessor or held (i) for sale, (ii) for lease, (iii) to be furnished under a service contract, (iv) as raw materials, (v) as work in process, or (vi) as materials used or consumed in a business. Goods held for sale include the finished suits of a clothing manufacturer, the spare parts of an auto parts dealer, and the stock in trade of a retail merchant. Leased goods include the fleet of cars held for lease by a car rental agency and similar goods that a leasing company provides to customers. Goods furnished under a service contract include any goods used to perform a service contract. It does not matter whether the goods are sold. For example, paint is inventory of a house painter whether or not a homeowner is billed for the paint separately. Raw materials and materials used or consumed in a business include any raw materials that are manufactured or processed into finished goods. During the production process, they are work in process. These materials are inventory at all times, from their acquisition as raw materials to their completion as finished goods. The stage of manufacturing or processing, however, can affect their value. While the value or collateral usually increases during the manufacturing process, some specialty goods with a limited market can decrease in value if the market dries up. Goods that are incorporated into a finished product (e.g., steel, lumber, nails), goods that are used up in business operations (fuel), and goods that are used in conjunction with finished goods (e.g., cartons, packages, wrappings) are inventory of the manufacturer.

leasehold improvements—tenant's improvements in connection with a commercial lease of office or retail space and improvements such as office buildings and retail shopping centers on ground leases of real property.

letter of credit rights—a right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance. The category does not include the right of a beneficiary to demand payment or performance under a letter of credit.

motor vehicles—every kind of motor‐driven or propelled vehicle, including trailers, house trailers (other than house trailers that are manufactured homes), and semitrailers; motorcycles, motor‐driven cycles, and mopeds (excluding those motorcycles, motor‐driven cycles, and mopeds designed for and used exclusively on golf courses); and four‐wheel all‐terrain vehicles designed by the manufacturer for off‐highway use, whether required to be registered or not.

oil and gas—interests in oil, gas, and other minerals in the ground or produced and saved, leasing rights, and rights to share in production and royalties.

patent—a 17‐year right to exclude others from making, using, or selling products that are covered by a U.S. patent.

real estate—land and any improvements (i.e., any buildings or other structures, including fences, driveways) constructed or installed on the land in a permanent manner. Real estate includes not only the ordinary building materials (e.g., (p.212) brick, mortar, doors, windows, etc.) that were used to construct a building, but also goods that were installed in and have become an integral part of the building, such as light fixtures, elevators, and heating and air‐conditioning equipment.

rolling stock—locomotives, railroad cars (e.g., hopper cars, boxcars, tank cars), and other portable or movable machinery or apparatus of a railroad.

securities and security entitlements—a security, whether certificated or uncertificated, security entitlement, securities account, commodity contract, or commodity account. This category includes obligations of an issuer or a share, participation, or other interest (including corporate stocks and bonds) in an issuer or in property or an enterprise of an issuer which:

  1.  is represented by a security certificate in bearer or registered form, or the transfer of which may be registered upon books maintained for that purpose by or on behalf of the issuer;

  2.  is one of a class or series or by its terms is divisible into a class or series of shares, participation, interest, or obligation; and

  3.  is or is of a type dealt in or traded on securities exchanges or securities markets; or is a medium for investment and by its terms is a security governed by Article 8 of the UCC.

tort claims—a civil wrong arising in torts for which a remedy may be obtained in the form of damages.

trademark—common‐law rights to a logo, name or other mark established by use of the mark and federal or state statutory trademark registrations of the mark.