Asset stripping

Asset stripping may refer to:

Business

Asset stripping involves selling the assets of a business individually at a profit. The term is generally used in a pejorative sense as such activity is not considered productive to the economy. Asset stripping is considered to be a problem in economies such as Russia or China that are making a transition to the market. In these situations, managers of a state-owned company have been known to sell the assets which they control, leaving behind nothing but debts to the state.

A fictional example of asset stripping can be found in the 1987 film Wall Street. In this film, the ruthless investor Gordon Gekko, played by Michael Douglas, purchases the failing airline Blue Star, under the pretense that he will restructure the company and return it to profitability. However, we later learn that he intends to liquidate all of the company's assets.

Insolvency

In Insolvency Law, asset stripping is an illegal practice whereby the assets of a company are sold below market price to another company or individual in order to deny their value to creditors when the original company is liquidated. Essentially, it is a fraud against creditors and shareholders, by selling assets or security below market value to another person.

Developing nations

"Asset stripping" is used to describe the practice of investors dealing directly with armed militant groups in developing nations to take direct control of assets that legally belong to the state or commons or any group in society that the investor and armed militant can effectively coerce. It has led to deforestation in Africa and Colombia and to other harmful effects. Jim Friedman on a United Nations panel on exploitation of natural resources in the Democratic Republic of Congo, listed this as one of several key concerns in "investment and human rights".

Anthropology

In anthropology, "asset stripping" can refer to a family which loses wealth when the head of household dies. In many African countries, it is common for the head of household's brothers and sisters to take the house and household goods from a family as opposed to those goods being given to the widow/widower or children. Similarly in developed nations inheritance tax can lead to valuable family assets (e.g. the house) being sold to pay the bill.