Buying back assets after insolvency
One common concern for business owners is whether they are able to buy their business (or some of its assets) back, after a company has entered into administration of liquidation.
The short answer is yes – you can buy the business back, or substantially the whole of it, or simply purchase a specific asset. The purchase price will depend on what assets the company has, and what you want to buy back. Whatever you purchase, you will be required to pay fair market value to ensure losses to creditors are minimised and promote faith in the insolvency process.
The most important thing is that you do have the opportunity to buy assets back, which could enable you to continue with the business.
Buying assets from an Administrator
Most business owners will have heard the term “pre-pack”. This refers to a process whereby the sale of a business and assets is negotiated with a purchaser prior to the appointment of an administrator, and then completes immediately after appointment. The process has been viewed as controversial, but these sales are useful in achieving the rescue of a business as a going concern, and often provide a better outcome for the creditors.
New rules, the Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021 (“the Regulations”) came into effect from 30 April 2021 and apply in cases where an administrator intends to dispose of substantially the whole of a company’s business or assets to a connected person, within 8 weeks of the start of the administration.
Under the new Regulations it is now mandatory for the administrator to get creditor approval, before the proposed transaction; or for the purchaser to obtain a report from an evaluator on whether the grounds and consideration for the sale are reasonable.
Buying assets from a Liquidator
The new Regulations only apply to sales in Administration, they do not cover sales in the case of voluntary liquidation or any other company closure process.
However, in voluntary liquidation, the Liquidator is also obliged to maximise realisations for the benefit of the insolvent company and has separate duties relating to the sale of assets to a connected party. Such transactions may be in the best interests of creditors but require full disclosure to creditors as soon as reasonably practicable.
Why buy back company assets?
There are many valid reasons as to why a business owner would want to buy-back company assets. For example, you may want to set up a new company or join another existing business which could use the assets which are up for sale.
Alternatively, you may want to acquire an existing brand, or trading name. This allows you to retain goodwill built up by the insolvent company and could help a new business get off to a positive start. However, there are specific rules which govern the re-use of a company name, or names that suggest an association and although it is possible to re-use a company name you should take advice before you proceed.
Contact Keystone Recovery
If you are considering closing your limited company and would like to know more purchasing company assets then please do not hesitate to contact us for a no obligation assessment. At Keystone Recovery we will clearly explain all of the options available and provide transparent advice about the benefits and risks of each option.