Can Directors buy back assets through a Liquidation?
Is your profitable business being held back by historic debt/problems?
Often Directors who approach me for advice are confident that, despite their Company’s current problems, there is a potentially profitable business if only they were able to start over again.
In such circumstances the Directors sensibly ask the question as to whether or not it is possible, if they were to place the Company into Creditors Voluntary Liquidation, for them to purchase the assets of the Company themselves.
The simple answer is, in most cases, yes.
The insolvency legislation, founded upon the basis of encouraging a culture of enterprise, is in fact very supportive of giving businesses, and directors, a second chance. The alternative would be to present Directors with a choice between continuing to trade an insolvent company, with the inherent risk of personal liability, or ceasing to trade entirely with the consequences likely to include redundancies, loss of revenue for the Exchequer and a shrinking national economy.
The most important aspect to this is that a fair value must be paid for any assets, be they physical such as motor vehicles, plant and machinery or stock, or intangible such as goodwill.
In order to ensure that any sale to the Directors is valid an independent valuer would normally be instructed. The valuers that I deal with have a great deal of experience in insolvency valuations and are capable of taking a realistic, pragmatic view as to the price that should be paid in such circumstances, without prejudicing the interests of the Company’s creditors.
If you are a Director of a Company which is struggling to meet its liabilities, which is perhaps under pressure from creditors such as HMRC, but which you feel, with a clean slate, could be profitable, please call me direct on 07718 133927 and I will be happy to discuss the options available to you.
Director and Licensed Insolvency Practitioner