Where to begin
Your business might be heading towards liquidation, and as a result, you wish to sell off your assets. However, this is not something that can be done at will; strict regulations govern the process to ensure there is no evidence of fraud or other issues that contravene the Insolvency Act 1986.
When closing your business, your liquidator will assess all of the company affairs. If there are any discrepancies found (such as selling or transferring assets below their true value to the detriment of creditors), the transaction might be overturned by the Courts. When a company is heading towards liquidation, the interests of the creditors should always be the priority, and the directors of the business have a duty to ensure the best is done by all of them. Preferential treatment will not be tolerated.
It is absolutely essential that you do not overlook or fail to disclose any assets whatsoever as this will cause problems during the closure of the business, resulting in delays and potentially incurring greater costs. It is advisable to seek professional advice to ensure no errors occur whilst selling or transferring assets before liquidation and 1st Business Rescue can help.
How do I verify the value of the company’s assets?
If it is decided that assets will be sold prior to liquidation, it is essential that all directors are involved in the decision and a board meeting should be held, with the outcomes documented. When agreed by all, a qualified valuer should accurately value everything due to be sold and should also oversee the sale itself. Keep records of everything in case you need them at a later date.
What happens if it is deemed assets were undersold?
The liquidators involved in the insolvency process will be investigating all of the company’s affairs which will include assessing the value of the assets sold prior. If the liquidator does find that assets were sold at a reduced value, they are likely to make an application to the Courts who have the power to force the reversal of the transaction. This can then result in large fines for the directors, disqualification as a director and can even result in a criminal conviction in some cases.
Can I move assets between my businesses?
Again, this sort of action would be deemed as a transaction within the business being liquidated and would be investigated by the liquidators. If the movement of assets is seen to be to the detriment of the creditors of the company being dissolved, this would not be allowed, and again the Courts could be applied to for a reversal of the transaction. The process of transferring assets between businesses would need to be the same as if the assets were being sold; hold a board meeting and appoint a qualified valuer to value and oversee the movement of them. This will help to avoid potential challenges from the creditors.
If you have any doubt whatsoever, it is imperative that you do not act without the proper advice. At 1st Business Rescue, we will be able to advise you of how best to manage all aspects of your move to liquidation. This includes factors such as selling assets in advance. If not handled correctly, the ramifications can be significant, so get in touch with us and we’ll be happy to help.