Liquidation & Administration – Top 7 Tips

Liquidation & Administration – Top 7 Tips

Purchasing from a company in Administration or Liquidation

When a company goes into liquidation or administration a liquidator or administrator is appointed.

The liquidator/administrator will sell all of the company’s assets ie. premises, stock, customer base and turn this into cash with any surplus being used to pay the creditors.

As a buyer, you can pick and choose the parts of the business and assets you want to buy – to some this is seen as an advantage.

So what are the top 7 tips when purchasing from a company in administration or liquidation:


1. Are you buying from the insolvency Practitioner (IP)?

 Make sure you are dealing with the IP/IPs. Buying from a company director where they are moving/selling assets before an IP is appointed could be seen as wrongful trading. Where wrongful trading is suspected it is very likely that a formal investigation will be carried out. The result might be that the transaction could be reversed and the assets taken back.


2. Find out what is included in the sale.

It is not always clear what is included in the sale so you will need to find out.

For example: –

  • If you are purchasing the premises and it is leasehold, is the landlord prepared to offer you a new lease and on what terms? Will you have to put down a deposit, pay any arrears, and any liability for repairs?
  • If you are purchasing items such as machinery, equipment or software licences are they subject to any agreements? Are these suppliers happy to carry on supplying you? Some lenders may have security over certain assets which need to b released.
  • Does the business come with Intellectual Property Rights (IPR): – website addresses, Facebook pages etc.? Get the admin rights to all the IPR.

3. Do your Homework!

Find out what went wrong with the business.  Have a walk around the business and ask as many questions as you can

If buying premises/property you must do the investigating of title to make sure everything is fine and the property is ok.

It is on YOUR due diligence that you should make your offer to buy.

Note that you can only see the books once your offer to buy have been unconditionally accepted.


4. Be aware of the Law.


If you are retaining staff from the liquidated business you may have to honour all

the employment contracts.

Past service pension liabilities will normally remain with the insolvent seller but some early retirement pensions will not be excluded. The buyer will need to establish what rights (if any) are transferred.


5. Liabilities and Warranties

“Caveat Emptor” – Buyer Beware

IPs are very unlikely to give you any kind of representations or warranties to the business and assets being sold. They most probably don’t know much about the insolvent business and will want to avoid continuing liability.

So if the commercial risk is borne by the buyer make sure it is reflected in the price.


6. Post completion matters

  • VAT

Is VAT payable on the assets that you are buying?

  • Stamp Duty and Stamp Duty Land Tax

Important if you are buying stock, shares, land or buildings

  • Assignment of leases/licences/contracts with customers and suppliers

These all relate to “find out what is included”. You will need know what paperwork needs to be completed after purchasing

  • Apportionment of outgoings and accruals between the seller and the purchaser for period spanning completion

Who is going to pay for the bills that are accrued whilst you are purchasing the assets?


7. Always get Legal Advice

If in doubt get legal advice from a professional before purchasing any assets.

For further information, please contact our Corporate and Commercial Paralegal Ella Coverley on 0161 926 1512