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16 June 2009, 12:21

SCO vs. Linux: New investor rescues SCO from bankruptcy

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In yet another bizarre twist in the interminable legal dispute over source code allegedly illegally copied from UNIX System V into Linux, the SCO Group, which claims ownership of the disputed code, has secured a last-gasp reprieve from the threat of liquidation. Immediately before the crucial liquidation hearing in the bankruptcy court, SCO CEO Darl McBride signed an agreement with a company by the name of Gulf Capital Partners, backed by well-known investor Stephen Norris. Caught out by the surprise development, all parties have agreed to postpone the liquidation hearing until the 16th or the 27th of July.

According to a report by the Salt Lake Tribune on the hearing, Gulf Capital is to invest in the SCO Group with the aim of meeting all the company's obligations to its creditors. The company will then continue its litigation business against IBM and others under Darl McBride, as previously announced by Stephen Norris back in early 2008. The majority of SCO's 62 employees will continue selling SCO software, but under a new company headed by SCO president Jeff Hunsaker.

According to eye witness reports posted on Groklaw, SCO CEO Darl McBride turned up late for the hearing, where the main item on the agenda was the immediate Chapter 7 liquidation of SCO. He presented the agreement with Gulf Capital Partners, with the ink still wet, and stressed that SCO would receive new money to enable it to pay off all its debts. The largest creditor is Novell, with which SCO remains locked in dispute over the copyright to UNIX. Lawyers from Novell and IBM, which is also still in dispute with SCO over alleged pilfering of source code, requested a postponement in order to study the agreement. They were joined by the US Trustee representing the remaining creditors. The judge scheduled a new hearing for 17th and 27th July, but criticised the behaviour of SCO and its lawyers for presenting the critical agreement at the last minute.

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