The primary objective of a liquidator during the process of company liquidation is to optimize the returns for the creditors. To achieve this goal, the liquidator has to sell the assets of the business after a professional valuation, ensuring that the creditors receive the highest possible repayments. In certain situations, the directors of the company undergoing liquidation may have intentions to initiate a new venture and may require specific assets such as IT equipment, fixtures and fittings, or vehicles. It is plausible for the directors to procure these assets from the old company.
Importance of Timing When Repurchasing Assets in Liquidation
If you’re considering repurchasing assets from your liquidated company, it’s crucial to take into account the timing of the purchase. Acquiring assets from the business prior to the appointment of a liquidator is likely to be perceived as a transaction that has negatively impacted the creditors’ position.
The liquidator must be in control of the purchase, ensuring that the assets are valued at a fair market price. The liquidator must prioritize the creditors’ interests and make sure that the assets are sold at the highest possible value and not undervalued.
While it is permissible to reacquire assets during or after the liquidation of your company, the transaction must be supervised by the liquidator. You should avoid purchasing any assets from your failing company before the liquidator’s appointment.
Benefits of Reacquiring Assets in a Liquidation
Acquiring assets through a liquidation sale can be an economical option, particularly if you’re establishing a new business and have limited resources. It can facilitate the start-up process if purchased according to the stringent insolvency regulations. Additionally, you can benefit from your previous hands-on experience with the assets, including knowledge of their history, their worth to the business, and whether they provide good value for money. This familiarity can aid in the smooth transition from one company to another.
Hazards of Buying Back Assets Prior to Liquidation
If you acquire an asset from your company after it has entered insolvency but prior to the appointment of a liquidator, and the purchase price is less than the fair market value, you run the risk of facing allegations of wrongdoing. These transactions, known as “transactions at undervalue,” can be reversed by the liquidator or result in the recovery of the asset that was purchased. The liquidator will closely examine the company’s financial records for any transactions of this nature for up to two years prior to the insolvency declaration.
Purchasing back assets before the appointment of a liquidator, as opposed to during or after liquidation, poses a significant risk to you and other directors. If you need further information on the regulations governing the repurchasing of assets during insolvency, please contact one of our knowledgeable team members.
As liquidation experts, InsolvencySupport.co.uk can provide impartial professional advice. We provide free same-day consultations and operate a network of offices throughout the country.