Can I sell business assets before the company goes into liquidation?

Disposing of company assets before entering liquidation

In theory, it is possible to sell business assets before your company goes into liquidation, but the Insolvency Act sets out the strict conditions under which this can be done.

Failing to meet these requirements can lead to accusations of misconduct or even fraud, and carries severe penalties even when you’ve not deliberately tried to deceive.

So why are these restrictions in place, and what steps do you need to follow prior to selling assets in this situation?

Legitimate sale of business assets before liquidation

Call a board meeting

Obtaining agreement from all board members is vital prior to selling assets under these conditions. It shows you’ve carefully considered your actions, and have made careful minutes of the board meeting as proof.

Keep detailed records

Keeping comprehensive records of your thoughts and beliefs prior to the sale - the reasoning behind your actions and board meeting notes - helps to prove that you’ve acted in good faith.

You should obtain a full written valuation from a professional surveyor, and retain all documentation and information related to the sale in case the liquidator needs to see it, even if you feel it might not be relevant.

Obtain a professional valuation

This is a key element in protecting yourself from accusations of misconduct. Obtaining a professional valuation of the asset(s) from a qualified RICS surveyor (Royal Institution of Chartered Surveyors) shows you’ve tried to maximise the funds from sale, and kept your creditors’ interests in mind.

The surveyor should also supervise the sale - it’s this degree of separation from the process itself that can further protect you from misconduct allegations as a director.

Seek professional insolvency advice

By seeking professional insolvency help, you are demonstrating your intent not to mislead or defraud. You’ll receive experienced advice on whether to sell these assets, and how to do so within the insolvency law.

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Your obligation to place creditor interests first

When your limited company becomes insolvent you’re obliged to place creditor interests ahead of those of yourself or your fellow shareholders in order to minimise their losses. It might be tempting to sell one or more assets to generate funds for creditors, but unless you’ve followed strict protocol you risk allegations of misconduct.

The appointed liquidator looks into transactions that have been made prior to the liquidation – sometimes up to two years beforehand – and can reverse any they believe are against creditor interests.

“Spoke with Chris who put me at ease straight away. He was very knowledgeable and listened intently to all my worries and concerns. Will definitely be using Real Business Rescue and advise anyone with business issues to give them a call.”

Diana

 

Contact the Real Business Rescue Team today

Chris Bristow
Business Debt Expert

Real Business Rescue is a major part of Begbies Traynor Group, the UK’s largest personal services consultancy. Please contact one of our partner-led team for more information on selling assets pre-liquidation. We can offer you a free same-day consultation, and work from offices throughout the UK.