If your company is facing liquidation due to insolvency, the chances are you will have a number of creditors your business owe money to which you simply cannot afford to repay.
One of the jobs of the Insolvency Practitioner is to recoup as much money as possible from your company in order to pay off as many creditors as possible. This is done through a sale of the assets the insolvent business holds.
Company assets include property, vehicles, machinery, stock and even the fixtures and fittings of the business premises. Other non-tangible items such as your company's website, patents, trademarks or any other intellectual property are also classed as assets of the company.
Only goods owned by your company can be sold as part of this process, so this means any vehicles or machinery you have on hire purchase, or any heavily mortgaged property will be excluded. Instead, any hired or leased goods will be returned to the leasing company, and the mortgage company repaid through the sale of the property.
All assets will be valued by an independent specialist auctioneer or surveyor. This is to ensure the true worth of the assets are realised, as it is in the Insolvency Practitioner’s best interests to get the most amount of money from this process as possible. Despite this, it is inevitable that the goods will be sold below their market value due to the distressed nature and immediacy surrounding the sale.
There are a number of ways the company’s assets will be sold, and it is the Insolvency Practitioners job to ensure the most suitable mode of sale is identified. The sale could take place through auctions, both traditional and online, or through business contacts of the Insolvency Practitioner or the auctioneer.
A record will be kept of the method by which each asset was sold, who the eventual purchaser was, and how much money was realised. The proceeds received from the sale will then be put towards paying off as much creditor debt as possible before the company is officially closed and its name removed from the Companies House register.
Once all assets have been sold and the insolvency practitioner is in receipt of the funds, these proceeds will then be distributed to outstanding creditors in order to cover as much of the company's outstanding liabilities as possible. Creditors are repaid according to a set heirarchy as laid out in the Insolvency Act 1986.
In the case of insolvent companies, there is going to be a shortfall between the money the company owes to creditors and the money available to repay these borrowings. Unfortunately some unsecured creditors are likely to miss out.
Once the company is liquidated, however, any remaining debts will be written off unless these have been secured with a personal guarantee.
If you are considering liquidation for your limited company, contact the experts at Begbies Traynor and speak to one of our fully licensed insolvency practitioners for immediate help and advice.
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