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Who values the assets in a company liquidation?

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What happens to company assets when it is liquidated?

When a business enters liquidation, there are typically a number of assets that need to be sold by the appointed liquidator. These assets are sold for the benefit of creditors, but initially they need to be professionally valued by an independent expert.

This applies whether the company has been placed into liquidation by its directors, via a Creditors’ Voluntary Liquidation (CVL), or has been forced into compulsory liquidation by a creditor. The money generated from the sale is then distributed to creditor groups.

UK Liquidators can provide professional support and guidance on voluntary liquidation, and are available for appointment as liquidators.

What type of company assets might be sold in a liquidation process?

Hard assets, such as plant and machinery, land and buildings, and heavy equipment, are valuable items and important to the liquidation process. They can generate significant sums if they’re wholly owned by the company, so it’s important that the valuation applied to them is realistic.

Businesses operate with various asset types, however, and the valuation and sale of intellectual property can also increase creditor returns. Even standard office equipment, such as computers and printers may be valuable, particularly if the business operates with a large IT department or is technology-based. 

Stock, raw materials, work-in-progress, and fixtures and fittings, are other company assets that may need to be valued and sold in a company liquidation. So how are these assets dealt with when a company goes into liquidation, and who values them?

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What happens to business assets in a company liquidation?

Company liquidation involves the sale at auction of its business assets. Third party buyers may include other businesses not associated with the company, sometimes including competitor businesses.

In some circumstances existing directors may be able to purchase the assets from the liquidator once a professional valuation has been given. This will typically be below current market value.

Who values a company’s assets in liquidation?

The assets are provided a realistic value given that company liquidation is the basis for their sale. It’s important to obtain an independent valuation in order to maintain a degree of separation during this formal insolvency process.

Proceeds from the liquidation sale are distributed amongst creditors in the prescribed order. Even when all the company’s assets have been sold, however, some of the debts will still need to be written off due to the insolvent position of the business.

Who is paid from the proceeds when the assets are valued and sold?

A professional valuation that reflects the insolvent position of the company enables the liquidator to generate funds for creditors. As we mentioned earlier, however, unsecured creditors are very unlikely to recoup a high proportion of their debt, if any at all.

Sometimes the proceeds of an asset sale will only cover the liquidator’s professional fees, but circumstances vary according to the type and size of business, and how many assets the company holds.

Limited company structure protects personal assets

The limited liability company structure means that any personal assets owned by the directors aren’t typically available to sell for the benefit of creditors. There are exceptions to this, such as when wrongdoing is found, but under normal circumstances the company’s debts are completely separate from the directors.

If you would like more information on the valuation of assets in a company liquidation, our partner-led team at UK Liquidators can help. We can also let you know if you’re eligible for director redundancy pay in liquidation. Please contact one of the team to arrange a free, same-day consultation – we work from a wide network of offices around the country.

Jonathan Munnery
Partner

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