The main purpose of the liquidation process is to ensure that assets are used to pay off as much creditor debt as possible before the company is dissolved and closed.

Determining assets

Company assets can be tangible – such as property, machinery, vehicles, computers, office furniture, equipment or tools – or intangible, like a commercial lease, intellectual property, customer database and the goodwill the company has built up over the years.

In their role as official liquidator, the insolvency practitioner (IP) must first establish whether the company actually has title to the asset before it can be sold. Any assets promised as collateral against a debt or loan cannot be sold without the creditor’s permission. Equally, any leased asset belongs to the lessor, not to the company.

Asset disposal

“If you’re a director of a limited company or partnership, you have a statutory duty to minimise losses to the company’s creditors. You must therefore try to get a good price for your business assets or you could be committing fraud,” explains Richard Simms, Managing Director, FA Simms & Partners.

The IP will aim to sell them for their fair market value; this is likely to be around 80% of their true worth. The proceeds are then disbursed amongst the creditors and shareholders according to a payment hierarchy.

Some of the ways in which an insolvency practitioner may try to find buyers for a company’s assets are via:

• Industry contacts (appropriate suppliers and competitors)
• Adverts in relevant trade publications
• Online
  listings on websites like eBay
• Specialist industry auction sites

Good record keeping

It is essential that a detailed record be kept of how each asset was sold, who ended up buying it and the amount received. This will help protect you later should a creditor challenge the liquidation methods used, or in case you have to file for bankruptcy.

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