Solvent-company rules are forgiving: directors answer to shareholders, and shareholders can waive a lot. Insolvency rewrites the audience. California law treats an insolvent company’s assets as, functionally, the creditors’ recovery pool — and transactions that were routine a year earlier become personal liability generators. The doctrines every owner should know before moving a dollar:
Fraudulent transfer. The Uniform Voidable Transactions Act, Civil Code §3439.04, voids transfers made with intent to hinder creditors or — no bad intent required — transfers for less than reasonably equivalent value while insolvent. Selling the company truck to your brother-in-law for $1, “transferring” equipment to a new entity that reopens under a fresh name, paying yourself a catch-up bonus while vendors go unpaid: all textbook voidable transfers, recoverable from the recipient, with a four-year reach-back (§3439.09). Successor-liability doctrine separately follows assets into the new entity.
Insider preferences. Repaying the loan you made to the company, or the one your spouse guaranteed, ahead of arm’s-length creditors is the transaction fiduciaries and trustees unwind first — and in a later bankruptcy, insider preferences reach back a full year under 11 U.S.C. §547.
The debts that pierce automatically. Some corporate obligations attach to individuals by statute, no veil-piercing needed: unpaid wages (Labor Code §558.1 imposes personal liability on owners and managers), trust-fund payroll taxes (the IRS’s 100% penalty under 26 U.S.C. §6672 and the EDD’s parallel), and collected-but-unremitted sales tax. The wind-down priority list writes itself: payroll, payroll taxes, sales tax — before anything else, including the bank.
The safe path is boring and documented: stop preferring insiders, pay the statutory personal-liability items first, keep every disposition at demonstrable market value, and move to an orderly process — a negotiated workout or an assignment for the benefit of creditors — where a neutral runs the distributions and the owner’s fingerprints leave the checkbook.
Insolvency is survivable. Improvised insolvency is what generates the lawsuits with your name, not the company’s, in the caption.
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The Hedge 