Asset Liquidation for Debt Repayment

What is Asset Liquidation?

Asset liquidation means selling your company’s assets to raise money. This money is then used to pay off creditors as far as possible, or if the company is solvent, it’s shared among shareholders.

The Asset Liquidation Process.

Our asset liquidation process is structured into clear steps, giving you a straightforward path to follow:

1. Appointment of an Insolvency Practitioner

To go through liquidation, the company shareholders need to appoint a licensed Insolvency Practitioner. They’ll manage the whole process: selling company assets, paying creditors, and distributing funds to shareholders if there’s anything left.

2. Inventory and Asset Valuation

The Insolvency Practitioner will inventory your company’s assets, such as property, machinery, vehicles, and stock. The assets will then be professionally valued to determine their fair market value so the IP can maximise sale opportunities.

3. Selling the Assets

Your company’s assets will be sold to raise funds to pay creditors and liquidation fees, which is known as asset liquidation. The way they’re sold will depend on their worth. Common methods of sale include auctions and private sales.

If property is involved, it will be sold through estate agents. Machinery and large-scale equipment can be sold through industrial auctions.

4. Distribution of Proceeds

Once the assets are sold, the Insolvency Practitioner will use the money to pay your company’s creditors. Legally they have to follow a strict order of payment.

1. Secured creditors

All creditors with fixed charge security over any company assets are paid first from those assets, e.g., lenders with a fixed charge over assets, like a mortgage. They’re paid first. If the debt is secured with a floating charge, they’re paid some of the funds after preferential creditors.


2. Preferential creditors

Including some employee claims and certain tax debts.


3. Unsecured creditors


Such as suppliers, customers, and other unsecured creditors.


4. Shareholders


If there are any remaining funds these will be distributed to shareholders. This is rare in the case of insolvent liquidation.

The Challenges of Liquidating Assets

• Asset depreciation – The value of assets is not fixed, and there is a risk that they will depreciate in value and sell for less than expected.
• Market conditions – The timing of the sale and the state of the market can affect how quickly and how well the assets sell.
• Complex assets – Intellectual property may need specialist valuations or a different sales process.
• Legal and administrative costs – The Insolvency Practitioner’s fees and other liquidation costs will come out of the money raised from the proceeds. This will reduce the remaining balance available for creditors.