If a company is insolvent and it needs to be placed into Liquidation but the owners or Directors wish to set up a new company and buy back the assets then this is possible. This type of Liquidation is often referred to as a PHOENIX LIQUIDATION or RESTART LIQUIDATION.
However, it should be noted that certain conditions must be met in order for this to be allowable, given the appearance of Owners and Directors closing down one business, leaving unpaid creditors, and setting up again with no obligation to pay back these creditors personally, these conditions are:-
1. A fair value must be paid for the assets. This is determined by obtaining a professional valuation by an independent Valuer.
2. There must be no intent to defraud creditors or trade wrongfully. This is ensured by providing full disclosure of the details of the sale so that all is transparent. There are also some restrictions regarding the use of a same or similar name therefore the purchase of the name and notice of this being done is often required.
3. The Director of the new company must not be disqualified from acting as a Director.
For full details on Liquidations generally click here to visit our Insolvent Company Liquidations page.
Sale as a Going Concern
Should there be a need to purchase the whole business (often as a going concern) then this can also be done however it may be more appropriate to use an Administration process as the vehicle to do this, given the likely increased realisations for Goodwill etc. However, as a general rule, Administration sales must realise at least £25,000 to be considered.
Or here to read our December Newsletter regarding Pre-Pack Administrations.
If you, or your client, need advice on any of these processes please feel free to call me on 01788 544 544 or freephone 0800 612 6197 for a free initial consultation or view the rest of this website.