Selling Assets of an Insolvent Company

Tricks, traps and offences in selling assets

A particularly tricky area to deal with is the sale of company assets, or the sale of the whole business, where a company is insolvent.

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It is such a tricky area that we always recommend that if a director is contemplating the sale of assets that they seek external expert advice before undertaking the transaction. That advice could come from your accountant, lawyer or call us (if we advise you on the transfer of assets then we will not be able to accept an appointment as liquidator).

There are three principles we recommend:

First principle

There is nothing illegal about the sale of company assets but there are a number of areas of the law that need to be considered and complied with. Whenever assets are to be sold to a related party the directors need to be particularly careful.

Second principle

Any sale of assets needs to be at a “market value”. Where assets are to be sold to a related party, we always recommend that prior to the transaction, the directors obtain an external independent valuation of the assets to be transferred or sold.

Third principle

Whilst the sale of assets is being considered or completed, a director must be very careful not to incur any new liabilities. If new liabilities are incurred during this process and they remain unpaid after the sale of assets then the directors may well be facing an Insolvent Trading action from a liquidator.

This is such a tricky area of the law, we are reluctant to provide too much general advice. Rather, if you are a director contemplating the sale of assets in an insolvent company situation we recommend you seek expert advice.

Related Topics

If the above advice has not answered your questions you might want to review the following pages and downloadable Information Sheets:

• Sale of Assets at Undervalue
• Duties when facing Insolvency

Or please call us for free advice.

If you would like to learn more about Liquidation, please access our full Liquidation guide created by Dissolve’s specialists explaining this in detail.