What Happens After My Company is in Liquidation?
Once a company is placed into Liquidation, it is the Liquidator’s duty to maximise the realisations so that the Company’s creditors get the best return possible. This means that the liquidator must review all of the records to identify all of the debtors then attempt to collect all of them in, as well as sell off all of the assets of the business. Sometimes the whole business can be sold by the Liquidator as a going concern (a complete business sale) were everything is sold in one go, upon the completion of a sale agreement. In this instance, the logistics of when the Liquidated Company ceases to trade and when the purchasing company starts trading, is vital. Therefore, speak to your Insolvency Practitioner to find out how best you can do this if you intend to Liquidate and purchase back your business.
It is also extremely important to consider the rights of the employees, as it is likely that if a business sale takes place, they will be considered to have continuity of employment. Therefore, the purchasing company will be considered to have taken on all staff, with their original start dates, and would be liable for higher redundancy costs if they were to be made redundant at a later date. It is possible to cherry pick some staff and get rid of some staff, if done right.
If I buy back my business, do I also take on its debts?
The short answer to this is no, you do not take on the debts of the insolvent company as the Liquidation will take care of this. The amounts you pay for the business are paid to the Liquidation estate where the Liquidator will pay them to all of your creditors as much as possible from the amounts received. Each creditor who claims in the Liquidation will therefore receive a dividend on their debt for the same percentage amount.
The only exceptions to this are:-
- Where you have signed a personal guarantee, agreeing to repay company debts personally; or
- Where you wish to purchase a legal claim and continue this in the hope that any judgement will go in your favour but where it goes against you and the net result is that you have to pay the judgement.
How are the assets sold if no business sale takes place?
The most common method used by insolvency practitioners to sell assets is by auction. This will usually involve an independent valuer coming to your premises, photographing all assets in lots, then selling these in their online auctions (rather than a physical auction on site). The valuer will contact all of his buyers as well as anybody who is disclosed to him as interested parties (this can be employees, directors and shareholders), in order to get the highest price.
If the above sales method is not used then, the next most common method is for assets to be sold by the Company prior to the Liquidation, however care should be taken to get the approval to the amounts received from the insolvency practitioner being used for the liquidation as he must ensure that none are sold at an undervalue.
Can my landlord seize my assets?
Once in Liquidation, the landlord of the liquidated company cannot seize the assets of the Company however the Liquidator is required to pay the Landlord for rent for any periods which he is in occupation. Therefore, he will have to pay rent whilst they are being sold or if the landlord won’t allow this, the assets will have to be removed for sale at the valuer’s depot.
What if I have no assets?
This makes the Liquidation case simpler for the insolvency practitioner, however their fees are usually taken from the asset sale proceeds and therefore will either need to be paid from debtor collections, bank credit balances, refunds or be paid personally by the director.
How long does the Company Liquidation take?
The legislation that the Liquidator must follow, when placing a company into Liquidation, is quite complex and requires long periods of notice for certain tasks and therefore it is not unusual for it to take 12 months to complete. However, it should be noted that as soon as it is in Liquidation, all responsibilities pass to the Liquidator and therefore the Director’s will be free of many burdens straight away. Simple liquidations with no assets or debtors should take no more than 6 months.
What are the other duties of the Liquidator?
For these, please see my article on the full duties of a Liquidator.
How long does the Liquidation stay on the record of the Director?
When considering the conduct of a director of an insolvent company, insolvency practitioners’ and the Insolvency Service are required to consider past failures within the last 10 years although personal credit issues (from unpaid personal guarantees only) last for 6 years only.