Buying back assets from insolvent companies: everything you need to know

Buying back assets from insolvent companies: everything you need to know

July 20, 2023 by Sandra

“Can I buy back company assets during or after a liquidation?” is one of the questions we are frequently asked here at McAlister & Co.

And the short answer is yes - however, there are several rules and regulations in place surrounding the process.

When a company is liquidated and the company assets have been valued, the assets are sold, and the proceeds are paid out to the company creditors to repay as much of the money owed as possible.

So, if you are considering purchasing the assets of your company after liquidation, read on to discover everything you need to know about the process…

Everything you need to know about buying back company assets

Who can buy a company’s assets?

Firstly, it’s important to note that whilst you might want to buy back your company’s assets, to get the maximum profit for the creditors, the assets are most commonly sold at auction.

Therefore, whilst company directors can absolutely buy back assets, you must be prepared for the possibility that a competitor or unconnected third party could purchase on or more of the assets as well.

Who is responsible for valuing the assets?

Establishing a fair market value prior to the sale of company assets is absolutely essential to ensure that any creditor losses are minimised.

As such, a professional valuer will be hired to determine the value of each individual asset to ensure that they are marketed at the right price to pay back as much money as possible.

Why buy back company assets?

When your company is liquidated, you may have plans to become a director of another existing business that could use the assets.

Alternatively, you could also opt to set up a ‘newco’, which is a brand-new business that uses the assets for sale. A good example of this is if you are the director of an insolvent construction company who chooses to set up a new company which could benefit from the purchase of equipment to make the process as seamless as possible.

As long as the purchase price of the assets isn’t lower than the professional valuation - and as long as the assets haven’t been snapped up by someone else - you’re good to go!

What happens if I buy the assets below value?

This is where those rules and regulations come into play! In the UK, there are very strict insolvency laws to protect the creditors of failed businesses, which is why directors can often be investigated to ensure they are acting fairly and there are no signs of misconduct.

If it is discovered that assets are bought back below market value, this is called ‘transactions at undervalue’. Not only is this a possible breach of section 238 of the Insolvency Act 1986, but the sale could also be reversed by the liquidator - and you could find yourself accused of fraudulent or wrongful trading, too.

When should I buy my company assets back?

This is another part of the process which is strictly controlled. When buying back company assets with personal funds, the transaction must be carried out once the liquidator has been appointed, so either during or after the liquidation.

If the transaction is made beforehand, this will come up during the liquidator’s investigation. The transaction will then be reversed, and you could be accused of misconduct.

What is a pre-pack administration then?

A pre-pack administration or liquidation is a formal insolvency process that enables directors to close down an existing company and form a new one - sometimes known as a phoenix company - which will purchase the old company’s assets before beginning to trade under a different name.

A pre-pack liquidation is a great option if you believe that your company could still be profitable once its debts are written off. Plus, it also provides a better return for creditors than a regular liquidation, and there’s the chance for staff to be re-employed by the new company as well.

Need advice about buying back your company’s assets?

If you are thinking about buying back any company assets once your company enters liquidation, it's important to seek expert advice to ensure that a fair value is attached to each asset and that the process runs smoothly.

If you’re unsure where you stand as a company director and have questions about buying back company assets, here at McAlister & Co, we can help you to navigate the process.

As expert insolvency practitioners, we are here to help every step of the way. Contact our dedicated team today to find out more about how we can help.

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