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Asset Liquidation Agreement (ALA)

Asset Liquidation Agreement (ALA)

What Is an Asset Liquidation Agreement (ALA)?

An asset liquidation agreement (ALA) is a contract between the Federal Deposit Insurance Corporation (FDIC) and a company that consents to deal with the sale of the assets of a failed financial institution.

ALAs frame the types of fees that the company can receive compensation for and the value of distressed assets that the company is responsible for dealing with.

These contracts are additionally alluded to as Partnership Dissolution Agreements,

Grasping an Asset Liquidation Agreement (ALA)

Asset liquidation contracts previously appeared during the 1980s, when the U.S. savings and loan industry was experiencing a financial meltdown. More than 1,000 savings and loans companies, almost a third of those in presence in the U.S., had failed by 1989.

The FDIC wanted to determine failed banks and financial institutions as quickly as conceivable to protect the interests of depositors, other financial institutions, and the overall economy. Simultaneously, the FDIC wanted to safeguard the federal deposit insurance fund. That implied that it needed to sell the assets of the failed banks at the highest cost it could acquire.

ALAs were intended to augment the current value of net cash flows that the FDIC could recuperate through the sale of distressed assets.

Asset liquidation agreements are currently utilized regularly to break up business partnerships.

Different Uses for ALAs

This type of contract is presently utilized by business owners seeking to break down a business partnership or by business owners whose partners wish to exit the businesses.

Partners who need to head out in a different direction must file a statement of disintegration to the Department of Treasury and with the province representative's office of each and every district wherein the business has regularly worked. The two partners must likewise consent to distribute somewhere around two notification that declare the liquidation of the business.

Fees and Incentives of ALAs

Asset liquidation agreements were initially offered exclusively to asset management subsidiaries of banks that were keen on procuring the assets of the liquidating bank. At last, any private sector asset management company could partake.

The agreement generally permits contractors to be paid for their overhead endlessly expenses connected with the treatment of the assets. These expenses included taxes and reports as well as legal and counseling fees.

The incentive fee is a major part of the fee structure of the ALA. The fee is scaled, with the contractor getting a higher fee for achieving a high level of net collections.


  • The terms of the ALA terms are defined by the FDIC, which searches out banks ready to get the assets of failed banks to guarantee a quick and orderly resolution.
  • ALAs were made during the 1980s to assist with settling the savings and loan crisis.
  • An asset liquidation agreement (ALA) explains the terms and obligations for third-party contractors who gain the assets of a bank in liquidation.