A guide, not advice. This explains how things generally work. A licensed insolvency practitioner will tell you what applies to your company or to you.
What Happens to Company Assets in Liquidation?
When a company goes into liquidation, all of its assets - cash, stock, equipment, property, book debts, and intellectual property - pass to the liquidator, whose job is to realise (sell) them and distribute the proceeds to creditors in a legally defined order.
Understanding what happens to assets helps directors set realistic expectations and cooperate with the process.
The Order of Payment
The liquidator distributes the proceeds of assets in this order:
- The costs of the liquidation - the liquidator's fees and disbursements
- Preferential creditors - certain employee claims (unpaid wages, holiday pay, pension contributions) up to limits
- Secured creditors - those with a charge over specific assets (e.g. a bank with a debenture)
- Unsecured creditors - suppliers, HMRC (for most tax debts), and others with no security
- Shareholders - only if anything remains, which is rare in an insolvent liquidation
Types of Assets
Physical Assets
Stock, machinery, vehicles, and equipment are sold - often at auction or to trade buyers - for the best available price.
Property
Freehold or leasehold property is valued and sold. Where it is subject to a charge (mortgage), the secured lender is paid first from the proceeds.
Book Debts
Money owed to the company by customers is collected by the liquidator, who may pursue payment or sell the debts to a third party.
Intellectual Property
Brands, patents, and trademarks may have value and can be sold, sometimes as part of a going-concern sale.
Assets Subject to Finance or Leasing
Assets on finance agreements (hire purchase, leasing, or retention of title) generally do not belong to the company and must be returned to the finance provider. The liquidator will not sell them.
What Directors Should Do
- Hand over all assets and records promptly
- Do not remove or dispose of company assets
- Provide an accurate Statement of Affairs
- Cooperate with the liquidator's realisation process
Speak to a Licensed IP
If you want to understand what will happen to your company's assets, our Manchester-based practitioners will explain the process clearly and honestly.