The simple answer is yes, as a director, you can sell your company assets before going through liquidation. However, it’s important to understand that there are strict regulations you’d need to follow if any assets are sold. And remember, the creditors interest will always take priority.
If you take an action without seeking professional advice first, you could run the risk of falling foul of the Insolvency Act 1986.
What are the risks?
When you wish to sell assets in this situation, you need to be cautious. It’s all too easy to overlook certain assets or even forget to disclose them properly. Thanks to the Insolvency Act 1986, a liquidator will have the power to conduct an investigation into your company.
The liquidators will aim to get the maximum repayment for creditors. If they come across any wrongdoing, possible fraud, or discover that assets have been sold or transferred at under value, they will be able to make an application to the Courts to void (ie overturn or reverse) the transaction.
The penalties for making transactions at undervalue can be severe, if they don’t confine to do what is in the best interest of the creditors. Not only can the transaction be reversed following an application to the Court, but you could end up suffering a heavy fine. Along with personal liability for some or all company debts, getting disqualified as a director for up to 15 years, or sometimes even a criminal conviction.
If you’re unsure in any way about how best to proceed, then you can contact our experts at Clarke Bell for free, impartial advice on the best way to move forward.
What if I move assets to another company?
If you’re considering moving assets from one company to another, tread carefully. Just like selling them, It’s equally unacceptable to transfer assets from one company to another at undervalue.
Any transaction which disadvantages creditors in anyway, or favours one creditor over another, such as pledging assets as security, will likely be challenged. Assets transferred at undervalue will likely be overturned if a liquidator applies to the Court.
If you still want to go ahead with moving assets to another company, you need to ensure everything has to be done in the correct way. Of course all board members need to have agreed to the transfer of any assets, and the assets need to have been correctly valued by a RICS qualified surveyor. If a winding up petition has been issued, you won’t be able to transfer assets, as doing so will leave you in serious breach of your duties as a director.
How can I avoid accusations of selling assets at undervalue?
When you want to sell assets before liquidation, it’s best practice to hold a board meeting to discuss proposed sales first. Doing this will give you more protection, as it will show that you wanted to gain board approval. As mentioned, you’ll also need an RICS qualified surveyor to accurately value the assets, and oversee the sale.
It’s perfectly possible to sell assets before going through liquidation, however it’s always best to seek out professional advice when doing so, to ensure you stay within the law.
If you have any concerns, or you’re unsure about what you are legally able to do, we can help guide you through the process. Ensuring you obtain the right value and comply with any regulations.
Please get in touch with us today.
