• Provide a vehicle to wrap up loose ends when lower value or less liquid assets remain. 101, can qualify as sale or exchange of shares for Federal Income Tax purposes allowing stockholders to recognize loss to the extent the cost basis of their shares exceeds the per share value of assets transferred to the liquidating trust.
• “Liquidation” into trust can end officers’ deferral period for severance payments under IRC 409A, depending on specific company circumstances. • As the winding up process progresses, the trust is readily administered on an as needed basis, versus retaining a corporate officer trying to move on with his/her life.
If it wasn't so scary to buy them everyone would do so.
Every once in a while the market offers up bargains that seem too delicious to be true.• Lower burn rate versus costs of maintaining company infrastructure.• Support a longer run off period to collect milestones or royalties from out-licensed assets – up to three years under Delaware law with ability to extend for longer lived assets.Unless a company uses its shares as currency (and this is part of its business strategy), when you invest according to the intrinsic value of a company price is only important when acquiring and disposing of shares - not in between.
Not too long ago royalty trusts were being gobbled up by investors faster than Wall Street could supply them.
In the context of a managed liquidation it can be particularly effective as the final stage of a well planned wind down process.