Letting go of the control of your company during the liquidation process is one thing, but what about letting go of your company assets?
You may be in a position where you need to close down your existing company for various financial reasons. Still, you are looking to start a completely new venture elsewhere that would benefit from the assets your existing company owns. So, why not buy back those assets from your current company to use for your new business?
This is possible, but there are a few caveats before jumping in and selling your company assets back to yourself.
This article will look at all you need to know when considering buying back assets during or following the liquidation of your company.
Timing is everything
If your company is entering into liquidation via voluntary or compulsory liquidation, you need to consider timing before buying back any of your assets.
Doing so before a liquidator has been appointed may put you in a bad position because the transaction may have worsened your creditors’ situation, which is a big no!
It is more than possible for you to buy back your company assets, but this must be done in agreement with your liquidator, who must put the creditors’ best interests first – which means raising the highest possible funds, usually via the sale of your existing assets.
Professional valuation of company assets
The liquidator must also conduct a professional valuation of your company assets before any sale can commence to you or anyone else. The valuation of your assets must be in line with a fair market value to ensure minimal creditor loss.
This process is usually carried out by a chartered surveyor hired by the liquidator, who will determine the value of each item. Following this, the assets will be sent for sale via auction or you, as a director, will have the option to buy back the assets.
The benefits of buying back assets in liquidation
One of the main benefits of buying back your assets during your company’s liquidation is cost-effectiveness. This is especially important when starting afresh with a new business, and you may not have significant funds available.
It also means you know the history of the assets while saving money as you have used them previously, meaning no nasty surprises down the line should an item stop working or have a problem.
Overall, buying back assets from your liquidated business is an excellent way to save money in the long term and will significantly benefit any new business venture moving forward.
The risks of buying assets before liquidation
As stated above, buying back assets before your insolvent company has been appointed as a liquidator can leave you in hot water. One of the main reasons for this is that you will have likely bought the item/s at a price below a fair market value, which could lead to allegations of misconduct.
In this event, the transaction is deemed “transactions at undervalue”, which your liquidator will be able to reverse and repossess.
And don’t think you’ll be able to sneakily get away with shifting assets either, as it’s the liquidator’s job to scrutinise every fine detail of your company’s transactions for up to two years before you have become insolvent, so they will always find out!
Who can buy a liquidated company’s assets?
Firstly, given that you have followed all proper procedures and agreed on selling assets at the correct value with your liquidator, you can!
If you can’t buy back your assets, then your assets go up for sale in an auction, and they are available for buyers of the public and owners of other businesses to purchase.
Regardless of how your assets are purchased, the sale value of those assets will be used to pay your creditors directly and, in turn, help complete your winding-up process.