Buying the business of an insolvent company

By LBV

08 Jun 2011

While the first few months of 2011 have provided some encouragement in terms of economic recovery, unfortunately there are still some businesses which have not been able to survive the recession, and have become insolvent.

For those more buoyant businesses, this may provide opportunities to snap up a bargain. There are, however, certain things to bear in mind when buying an insolvent company.

The Administrator
Usually where an insolvent company is available for sale, it will have gone into some form of administration, and as such it will be the administrator, and not the directors, who will be running the company. A prudent buyer should therefore take steps to ensure that the administrator has been properly and validly appointed, either under the terms of the court order, or the security documentation.

Timing and price
It’s in the interests of all parties to ensure that any sale goes through as quickly as possible. Once a business becomes insolvent, its status in the marketplace will disintegrate, and debtors and creditors will become increasingly disinclined to deal with that company. Similarly, the sooner the administrator can get his money, the sooner the creditors can be paid out. Bear in mind that the administrator is under a duty to obtain the best price reasonably obtainable in the circumstances (although this will rarely be the full market value).

Ownership of assets
When buying the assets of an insolvent company, it is essential to confirm that the company is the owner of the relevant assets. This is especially relevant where there is a group structure in place. In addition, especially where the company is a manufacturer or supplier of goods, certain assets may be subject to retention of title provisions (assuming the creditor has not been paid), and the buyer will have to take that risk on purchase.

Warranties
A major feature of any trade sale agreement is the warranty schedule, giving protection to the buyer. When buying from an insolvent company, the administrator will invariably refuse to give anything but the most basic warranty protection, on the basis that they are not privy to the relevant information, and that they do not want to be in a position whereby they have to repay money (which may have been distributed to creditors) once payment has been received. This lack of warranty protection should however assist the buyer in price negotiations.

Employees and TUPE regulations
Contrary to popular belief, TUPE does still apply when buying an insolvent business. A buyer will rarely wish to take on the entire workforce in these circumstances, and specialist advice should be taken to ensure the relevant obligations to inform and consult are complied with. There may be ways to deal with this situation, and the existence of the National Insurance Fund can assist with certain liabilities, however great care should be taken when seeking to dismiss any employee.

David Filmer
Harrison Drury Solicitors

 

Enjoyed this? Read more from LBV

Latest news

1

HBD secures planning for £37m Lancashire industrial scheme CGI of the site

HBD secures planning for £37m Lancashire industrial scheme

08 Nov 2024

2

Harrison Drury retains place in 'Best Companies to Work For' list John Chesworth

Harrison Drury retains place in 'Best Companies to Work For' list

08 Nov 2024

3

South Ribble animal feed manufacturer eyes export growth after funded business support The Bamford team

South Ribble animal feed manufacturer eyes export growth after funded business support

08 Nov 2024

4

‘Simpler’ council structure is on the cards westminster-london.jpeg

‘Simpler’ council structure is on the cards

07 Nov 2024

5

New strategic partners revealed for Preston Partnership Preston partnership launch

New strategic partners revealed for Preston Partnership

07 Nov 2024

PC PrestonMacan GIF980x120
Background image for hub sign up block

LBV Hub

Leverage Lancashire Business View platforms

Post your news
Post your events
Post your offers
Build your network
Improve your SEO
Gain coverage in the magazine
Sign-up
Events
The Lancashire Festival of Business
FOB 315
Exhibitions
30 Jan 2025

The Lancashire Festival of Business

Impact Conferencing, Burnley, BB12 6QP

09:00 - 16:00

RISE - The Academy for Female Leaders and Managers
WENDY BOWERS RISE Illustrstion copy.jpg.jpg
LBV Hub Seminars
11 Jun 2024 - 04 Dec 2024

RISE - The Academy for Female Leaders and Managers

East Lancashire Chamber of Commerce, Clayton le Moors, BB5 5JR

09:00 - 16:30

Skills Bootcamp in Procurement - Cohort 2
Blue-Modern-Land-Travel-Youtube-Thumbnail-2-1024x576.png.png
LBV Hub Seminars
15 Oct 2024 - 17 Dec 2024

Skills Bootcamp in Procurement - Cohort 2

Community & Business Partners CIC, Blackburn, BB2 3UA

09:30 - 13:00

mBITfor transformative leadership and coaching
mBIT coach Practitioner.png.png
LBV Hub Seminars
14 Nov 2024 - 17 Nov 2024

mBITfor transformative leadership and coaching

Unlocking Possibilities training venue, 166 Waterloo Road , Blackpool, FY4 2AF

09:00 - 17:00

The Business Network Central & East Lancashire
LBV Header (14).png.png
LBV Hub Networking
14 Nov 2024 - 14 Nov 2024

The Business Network Central & East Lancashire

Mytton Fold, Blackburn, BB2 7NP

11:30 - 14:15

Avidly Activates UK 2024 - Activate your customer-driven sales and marketing
avidly activates audience having a good time.jpg.jpg
LBV Hub Networking
14 Nov 2024

Avidly Activates UK 2024 - Activate your customer-driven sales and marketing

Everyman Cinema, Holmes Mill, Clitheroe, BB7 1EB

10:00 - 16:00

Live Work Create: Building Community In The Modern World
Live-Work-Create-Building-Community-1024x1024.png.png
LBV Hub Networking
20 Nov 2024

Live Work Create: Building Community In The Modern World

Society1 Coworking Space, Preston, PR1 3LT

18:00 - 20:00

LBV119 Magazine Launch Event
DSC9389
Networking
20 Nov 2024

LBV119 Magazine Launch Event

Stonyhurst College, Clitheroe, BB7 9PT

16:00 - 18:00

North West HR Employers Forum
CBP-logo LBV.png.png
LBV Hub Seminars
20 Nov 2024 - 20 Nov 2024

North West HR Employers Forum

Wham Stadium, Accrington Stanley, Livingstone Road, Accrington, BB5 5BX

09:00 - 12:00

Blackburn & Darwen Youth Zone Quiz Returns for 10th Year!
Quiz Pic.jpg.jpg
LBV Hub Fundraisers
21 Nov 2024 - 21 Nov 2024

Blackburn & Darwen Youth Zone Quiz Returns for 10th Year!

Accrington Stanley Football Club, Accrington, BB5 5BX

17:00 - 20:30

SPARK The Apprenticeship Marketplace
UCLanAerialCampus.jpg.jpg
LBV Hub Networking
21 Nov 2024 - 21 Nov 2024

SPARK The Apprenticeship Marketplace

University of Central Lancashire, Preston, PR1 2HE

09:30 - 13:00

Emergency First Aid at Work
Chamber Logo1.png.png
LBV Hub Seminars
21 Nov 2024

Emergency First Aid at Work

FGH Training, 3rd Floor, Storey House, White Cross Business Park, Lancaster, LA1 4XQ

09:00 - 05:00

Advertise with us

Reaching 50,000 members, our print, digital and event platforms offer a fantastic way to raise your business profile and help you grow.

Find out more LBV118 Online Graphic
Subscribe now

Weekly news bulletin