Alienation of Assets

In commercial terms, the world revolves around insolvency. Insolvency is the process whereby one's entire patrimony (i.e. the totality of one's assets) is liquidated in order to satisfy his total debts that have grown beyond his means. Insolvency procedures are problematic in that they mean liquidation of personal assets such as one's home and one's car. Unfortunately there are few ways to avoid insolvency, which most normally occurs through poor judgement or 'bad luck'. Fortunately, there are numerous ways in which the potential implications of insolvency procedures can be minimised to prevent loss of assets. For the lay-man, this can involve certain minor legal procedures which could ultimately save a fortune. For creditors, this can be particularly bad news. In this article we will look at entirely legal ways in which you can potentially avoid losing assets in insolvency procedures.

If you are running a small business, or likely to do so in the next decade, you must act on the following immediately to protect your assets. Alternatively, if you foresee yourself amassing significant unsecured debt in the coming years, you should also act similarly. Allowing a ten year margin, which might seem a lot, will prevent any challenges on sequestration and ensure that the assets you have 'alienated' no longer form part of your estate. The alienation ensures that the assets from which you will still benefit cannot be received by your creditors in consideration for any debts you accrue.

The first thing to consider is incorporating a limited liability company, or indeed several, within which to house your business operations. Conducting your business through a company may mean more paperwork, but it also removes you personally from any liability. Of course, your company can still be liquidated, but we will look at ways to avoid losing your business assets shortly. If you choose not to run through a corporate body, there are still ways in which you can minimise the potential for losing your assets.

The biggest and most valuable asset most of us will own is our home. It shouldn't come as any surprise that this is the number one target for many creditors. If you are married or living with a partner, there is no way you should ever lose your house in insolvency proceedings. Provided you allow sufficient time (i.e. 10 years), you can transfer ownership to your partner, thus the asset no longer belongs to you. You can then by agreement negotiate with your partner to continue living in the house, which for most will be a mere formality. At the end of the day, you no longer legally own the house, but functionally nothing has changed. Alternatively, you could assign your property by creating a trust in which you and your partner are the beneficiaries. All you need is to involve a third party (potentially even your partner) as trustee, before you will have alienated the asset. Again, functionally, you still live in the house, and it is still your home. The only difference is creditors can't touch it should the worst happen.

If you choose to run a through a limited company, your first step should be to establish at least one other company, which will act as a holding company. The holding company should then be made owner of all business assets, before effectively leasing back to the other company. The effect of this is theoretical. You own both companies, you own the assets, but should creditors attempt to attack your primary trading company, there will be no chance of losing your business assets. The leasing agreement between the two companies will also be theoretical, and will only require minor accounting procedures to grant legal validity. Provided you ensure your holding company avoids debt, there should be no problem in alienating your entire business patrimony.

There are a number of ways in which you can avoid potentially losing your assets in insolvency. Why not consult a specialist legal adviser for further information specific to your jurisdiction to help ensure total protection of your entire means.

Advantages of Federalism

Federalism is a legal and political concept suggesting that law is best made in a twofold relationship: centrally and locally. Operative in many nations around the world under many different guises, federalism is centred on the principle that locality is key to effective governance. It holds that by making laws at a local level, the legislators can take advantage of local knowledge and opinion, whilst also lightening the load centrally for governance on the wider ranging issues. This is not only bureaucratically significant, but also politically in the sense that those in power through the majority of local areas will surely assume power overall, thus creating fairer representation. Ultimately, in theory, federalism satisfies the will of the people more accurately than a purely central system of governance, which is one of the many reasons it has become so popular in recent years. In this article, we will discuss the main advantages of federalism as a legal order, and look at the main reasons for its growing popularity and strength across the world.

The first argument put forward for a federalist legal order is that a central government is too cumbersome when it comes to legislating over region specific matters. Take the United Kingdom, for an example. The UK government in London was often required to legislate on agricultural and fisheries matters that related to issues over 1,000 miles away in the North of Scotland. In this scenario, it would be unrealistic to expect the central government to have the requisite local knowledge and understanding required to make an effective decision for the prosperity of the region. In this sense, it is argued that a federalist legal order is more desirable, on the basis of making 'small time' decisions that affect specific localities with which it is acquainted. This has proven to be one of the strongest features of the federalist system, which largely relates to local people and their specific needs, and engages in political and legal decision making 'closer to home'.

Another very strong argument in favour of federalism is the fairer representation afforded by local and regional government. Again, the UK provides a fine example of how this would work in practice. Broadly speaking, the UK is divided into a left wing political party (Labour) and a right wing political party (Conservative). The Conservative party have a strong hold over the South East of England, which makes up a sizeable proportion of the population although covers limited geography. Labour have a traditional stronghold in Scotland which accounts for one third of the land mass but only one tenth of the population. In this sense, federalism would provide a fairer system of representation by allowing regional governance that could account more easily for local tastes and opinions and provide an altogether more representative picture of the nations political favour.

On top of these reasons, federalism lightens the load as respects central parliamentary time, freeing up national level politicians to consider more strategic rather than operational matters. This frees up resources and streamlines the process overall, although it does bring with it the complexities of an additional layer of authority. However, provided the legal system is well structured and defined in a codified form, federalism can make for more efficient governance and an overall fairer political and legal system, as well as bringing a host of other governmental and internal benefits to the table.

Federalism has grown in popularity over the last century or so, and this is largely down to its particular successes throughout the world. Much the creation of academic thinking and commentary, federalism brings about a system of governance that keeps the people happy, promotes local affairs, and leads to significantly more favourable governance nationwide. For these reasons, it is quickly becoming the favoured method of government worldwide, and has been adopted in centralist countries and larger regions alike to promote and maintain the diversity necessary for effective regulation at a national level.