See: Insolvency. See: Bankruptcy. See: Chapter 11. See: Chapter 7.
The whole "clause" thing after insolvency has nothing to do with Santa. In fact, it's kind of the opposite. Many times, lenders add their own contractual language for what happens should a company become insolvent, i.e. unable to pay its bills. You'll see this often when a larger distribution partner is loaning money to a manufacturer of a product they distribute.
The big distributor wants that product and the company's patents or brands or intellectual properties, should the manufacturer go bust. What the big gun doesn't want is for that company to go to auction and then have a competitor buy them, thus taking away all the hard work the distributor did initially to build relationships with retailers selling that product along the way. Think: Darwin.
Related or Semi-related Video
Finance: What is a 1099?0 Views
Finance, a la shmoop. What is a 1099? Well it's a tax form for the rest of us the
non fully employed, the non recipients of crappy health care and benefit plans, the [Man looks shocked at his medical bill]
non recipients of fancy corporate business cards those of us who choose to [Business card for Brett Corporate]
go it on our own as consultants, contractors, day laborers and
independents who self employ under the yoke of many masters trying to make our [A contractors diary]
own little way in the world, yeah. Corporations who hire contractors in
whatever form, must deliver to those contractors a form 1099 which outlines [Corporation giving out 1099s to contractors]
and stipulates the details of the job performed for the contractee. That 1099
is a direct conduit to the IRS holding out their arm to shake your hand and [The form 1099s are sent to the IRS]
then turning it 90 degrees to the right. [IRS's hand out expecting something]
Up Next
What is bankruptcy? Deadbeats who can't pay their bills declare bankruptcy. Either they borrowed too much money, or the business fell apart. They t...