Sell Company Assets Pre Liquidation?

Sell Company Assets Pre Liquidation? – YES BUT! Reliable, assured written legal advice is required.

Once the Liquidator is appointed, they must investigate potential wrongdoing or fraud by the directors, before their appointment. Therefore, selling assets MAY fall foul of the Insolvency Act 1986.

If you then sell assets, it’s therefore crucial to do so with extreme care.

Directors may overlook assets or do not disclose them. If assets remain sold or transferred undervalued, and therefore to the disadvantage of creditors, then an application to the courts, to void the sales, may however be made.

Moving assets between companies.

Again, considerable care required. A Director may do this, but the same applies to selling to a third party. Furthermore, the Liquidator will investigate any movements before the appointment. The Director’s obligations, therefore, remain the same to creditors.

Selling your assets to another company requires a considered path:

  • ENSURE all board members agree.
  • ENSURE an independent RICS qualified surveyor values assets.
  • TAKE NOTE, disposing of assets at undervalue is unacceptable, as is transferring assets from one company to another at undervalue.
  • All transactions which favour one creditor above others, or in some way disadvantage creditors, risks being reversed.
  • Any previous director decision, therefore, which the Liquidator believes were underhand, may then be reviewed, and if transferred at undervalue, can be overturned via the Court.
  • Once a Winding-Up Petition is active, directors may not sell or transfer assets.

Sell Company Assets Pre Liquidation – Avoid accusations.

  • If you plan to sell assets to raise cash before Liquidationarrange a board meeting, then ensure all members agree, establishing essential director protection.
  • IMPORTANT ensure independent RICS surveyor values the assets and, if possible, conducts the sale.

Sell Company Assets Pre Liquidation – Undervalue transactions?

Licensed Insolvency practitioners have the power to examine the company’s affairs before it enters the Liquidation or Administration. If a director’s old assets are undervalued, the transaction may be reversed via the Courts.

Severe penalties may then be issued to directors if they have not done what is in the best interest of creditors.

The penalties given may be:

  • Fines;
  • Personal liability for part or all company debts;
  • Disqualification as acting as a director. Max 15 years;
  • A criminal conviction.

Creditor interest a priority.

Directors responsibility, however, is always to represent the company in the best possible way. Therefore, when a company faces Liquidation, the creditor’s position should always have priority.

A director must therefore do what is best for all parties associated with the business. If perceived as preferring a creditor over another, then this may be considered a preference.


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