The main goal of any company liquidation, whether voluntary or compulsory, is to realise the assets of the company in an orderly manner. The proceeds from the liquidation are typically used to pay off outstanding debts, since the directors of a limited company are not usually held personally liable for these debts under UK law.
There are two ways assets can be sold during liquidation – they can be marketed by the liquidator and sold through a pre-arranged asset sale, or they can be sold at auction to the highest bidder.
The auction format tends to be used more often because it maximises the chances of receiving the highest return. The top priority is to repay the liquidated company's creditors. If any funds are leftover after the creditors have been fully repaid then the rest is evenly distributed amongst the company's shareholders.
If one or more of your creditors is trying to force your indebted company into a compulsory liquidation then it is important to note that the creditor who's petitioning the court will be in charge of assigning a liquidator to manage the auction process. A company's assets are usually sold at auction within 1 month of entering into liquidation, however it can take longer in some cases.
Literally any part of the business can be sold at auction, including but not limited to office equipment, unsold inventory, contracts, and even property. Only property that belongs to the company is considered an asset; so you wouldn't have to worry about personal belongings like clothing or household appliances being seized.
If you operate a home-based business your house usually wouldn't be in danger of being sold at auction, as the property belongs to you personally and, as mentioned, they won't hold the director of a limited company liable for the debts of the business – they will only recuperate the value of the company itself.
I understand that the last people you would ever want to speak to would be a business rescue firm, but I also know that trying to understand your options can be equally challenging. I have seen every eventuality in business and can help clarify what your options are.
After the liquidation auction, the liquidator will conduct an investigation to ascertain whether the directors of your company committed suspicious activity while trading insolvent. Any director found guilty of wrongful or fraudulent trading could be held personally liable for some or all of the company's debts, or may face steep penalties, including a potential ban from acting as the director of any limited company in the UK for up to 15 years. Fortunately, preventing such allegations is as easy as keeping track of your expenditures and adhering to the basic directors' duties while trading insolvent.
The only way to stop a compulsory liquidation is to satisfy the demands of the petitioning creditor(s) or convince the court to deny the request for a liquidation order. Once the winding up order has been issued you must deal with the cards you've been dealt.
The best way to keep your company from being sold at auction is to address the situation as soon as the possibility of liquidation arises. If you take action quickly enough you may be able to set up a company voluntary arrangement (CVA) with your creditors and agree upon revised repayment terms that will provide the leniency needed to recover. Real Business Rescue provide director advice online, over the phone, or in-person at one of our 75 UK offices or a place of your convenience.
If you're concerned about the possibility of your company being put out of business and sold at auction, or you have any questions about the company liquidation auction process, feel free to send us an email or call us on 0800 644 6080 for a free personalised consultation.