Company Assets. Can I Sell Them Before Liquidation?
Company Assets. Can I sell them before Liquidation? Directors can sell company assets before liquidation. However, strict regulations remain in place when selling assets. A liquidator may view wrongdoing or fraud. They have the power to carry out further investigations. Actions you take when not taking professional advice can lead to prosecution under the 1988 Insolvency Act.
If you do sell company assets, it’s essential to take care. Often assets on the balance sheet remain forgotten, or even not disclosed at all.
The 1986 Insolvency Act empowers liquidators to investigate company affairs and maximise repayment for creditors. If assets have been sold or transferred at undervalue, and to the disadvantage of creditors, the application will be made to the Courts to void the transaction and reverse it.
Moving Company Assets from One Company to Another?
Although assets may be transferred, the appointed liquidator will examine Intercompany transactions. Directors remain obligated to ensure the best for the company’s creditors. Therefore, disposing of assets before liquidation remains dangerous and should only be by the appointed liquidator. If you are not prepared to wait for an appointed liquidator, you must ensure all board members agree. Once agreement approved, valuations by an RICS qualified surveyor. As selling assets at undervalue remains unacceptable, transferring assets from one company to another at undervalue remains unacceptable also. A transaction which either favours one creditor or disadvantages creditors needs challenging. Any direct or decision seen by the liquidator as suspicious will need investigation. If they feel an asset remains transferred at undervalue, then overturned by applying to the Court.
The legislation does not allow directors to move assets when a winding-up petition has been issued. If a director’s attempts do so, they could breach their duties.
Avoiding accusations of selling Company Assets at Undervalue
If the directors decided to sell assets before a liquidation, then a board meeting by the directors to discuss and agree on any proposed sales. The directors individually may have some protection. It demonstrates they wanted to gain board approval for such an action.
An RICS qualified surveyor should then be hired to accurately document and value the assets, then oversee the actual sale.
Company Assets. Can I Sell Them Before Liquidation? – Risks for directors making transactions at undervalue.
Licensed Insolvency practitioners remain empowered to investigate the company’s affairs before liquidation or administration. If a director has sold assets undervalued, the transaction could possibly reverse, following an application to the Court.
Directors, however, face penalties if they fail to ensure the best interests of the creditors.
Penalties may mean fines, personal liability orders for part or all company debts, director disqualification up to 15 years or even criminal conviction.
The interest of Creditors should always take priority.
When can I sell company assets pre liquidation? The director’s responsibility must act on behalf of the company in the best possible manner. Once a company faces liquidation, then the creditor’s interest, which has priority.
Directors duties mean to carry out the best practice for all parties involved with the business. If they priorities one creditor over another, then this creates a preference.
Please read Directors Duties and Responsibilities for further support.
Can I possibly sell company assets before liquidation? Yes, but then always take advice to ensure you stay within the law. Failure to have the assets valued at the correct market value would then lead to the director(s) being personally liable.
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