When a company enters liquidation, directors often worry that everything the business owns will be lost forever. This can be particularly difficult where assets still have value or are essential to a future venture, such as equipment, vehicles, stock, intellectual property, or even the company name. A common and perfectly reasonable question is whether it is possible to buy back assets either during or after the liquidation process.
The short answer is yes, it is often possible to buy back assets from a company in liquidation. However, there are strict legal and ethical rules that must be followed. This article explains how asset sales work in liquidation, what directors are allowed to buy, when purchases can take place, and the risks of getting it wrong.
What Happens to Company Assets in Liquidation?
When a company goes into liquidation, control of the business and its assets passes from the directors to a licensed insolvency practitioner, known as the liquidator. The liquidator’s primary duty is to realise company assets and distribute the proceeds to creditors in line with insolvency law.
Assets can include:
- Machinery and equipment
- Vehicles
- Stock and work in progress
- Office furniture and IT equipment
- Property or leasehold interests
- Intellectual property such as websites, domain names, trademarks, and goodwill
The liquidator must act in the best interests of creditors, which means obtaining the best possible price for those assets.
Can Directors Buy Assets from a Company in Liquidation?
Directors are not automatically banned from buying assets from their own company once it enters liquidation. In fact, it is relatively common for directors to purchase assets, particularly where they plan to continue trading through a new company or as a sole trader.
However, the purchase must meet strict requirements:
- The sale must be at full market value
- The process must be transparent
- The liquidator must be satisfied the sale is in creditors’ best interests
Directors cannot simply take assets back or agree a discounted price because of their previous involvement with the business.
Why Market Value Is So Important
One of the liquidator’s core responsibilities is to demonstrate that assets have been sold for a fair price. Selling assets at an undervalue could result in criticism, regulatory action, or legal claims.
To protect all parties, liquidators will often:
- Obtain independent valuations
- Invite offers from third parties
- Document the decision-making process carefully
If a director’s offer matches or exceeds the market value, there is no legal reason it cannot be accepted.
Buying Assets During Liquidation
Assets are usually sold during the liquidation process rather than after it has finished. This is because the liquidator’s role is to convert assets into cash as efficiently as possible.
Directors may be able to buy assets:
- Shortly after liquidation begins
- As part of a structured sale
- Through a private treaty sale or auction
The timing will depend on the nature of the assets and whether there is an urgent need to realise value.
It is important that directors do not use company funds or creditor money to purchase assets. All purchases must be made using personal funds or finance from an external source.
Buying Assets After Liquidation
Once the liquidation has been completed and the company dissolved, there are usually no assets left to buy. Any remaining assets would have already been sold or distributed.
In rare cases where assets were not realised during liquidation, they may pass to the Crown as bona vacantia. Recovering such assets later is complex and uncertain, so directors should not rely on this route.
In practical terms, if a director wants to buy assets, it almost always needs to happen during the liquidation process.
What About “Phoenix” Situations?
A common scenario involves directors buying assets and continuing a similar business under a new company. This is often referred to as a “phoenix” arrangement.
This is legal, provided it is handled correctly. Key points include:
- Assets must be purchased at market value
- The sale must be properly documented
- The new company must not mislead customers or creditors
- Certain restrictions apply to reusing the same or similar company name
Failure to comply with the rules around phoenix companies can lead to serious consequences, including personal liability or director disqualification.
Are There Restrictions on Using the Same Company Name?
Under insolvency law, directors of a liquidated company are generally restricted from using the same or a similar company name for a new business within five years, unless specific conditions are met.
Buying assets does not automatically give the right to reuse the old company name. This is a separate legal issue and must be addressed carefully to avoid breaching the law.
Can Directors Be Accused of Wrongdoing?
Buying assets from a company in liquidation is not wrongdoing in itself. Problems arise only when the process lacks transparency or assets are sold below value.
Examples of risky behaviour include:
- Removing assets before liquidation without payment
- Agreeing informal deals without the liquidator’s approval
- Paying less than market value
- Using company funds to buy company assets
These actions can be challenged by the liquidator and may result in personal claims against directors.
What Is the Liquidator’s Role in Asset Sales?
The liquidator controls the sale process and must ensure that:
- All assets are identified and protected
- Sales are properly marketed where appropriate
- Creditors receive the best possible outcome
A professional liquidator will also explain the process clearly to directors, including what can and cannot be purchased and how to submit an offer.
Why Professional Advice Matters
Buying back assets can be an important step in starting again, preserving value, or continuing a viable part of a business. However, it sits in a legally sensitive area, especially where insolvency is involved.
Directors who seek early advice are far less likely to encounter problems later. Understanding the rules in advance helps avoid delays, disputes, and potential personal risk.
Simple Liquidation was designed to provide directors with a clear and straightforward route through liquidation, whether the company is solvent or insolvent. Their Insolvency Practitioners are authorised by the Insolvency Practitioners Association and the Institute of Chartered Accountants in England and Wales.
Jamie Playford FABRP MIPA and Alex Dunton MABRP are licensed Insolvency Practitioners regulated by the ICAEW and are members of R3, the Association of Business Recovery Professionals. With over 30 years of combined experience, they have dealt with hundreds of asset sales across liquidations of all sizes.
Conclusion
Yes, it is usually possible to buy back assets during a liquidation, including by directors of the company. The key conditions are that the assets are sold at market value, the process is transparent, and the liquidator is satisfied the sale benefits creditors.
Buying assets after liquidation has finished is rarely possible, so timing and correct procedure are crucial. When handled properly, asset purchases can be lawful, practical, and beneficial for all parties involved.
For directors facing liquidation, understanding these rules early can make the process clearer, safer, and far less stressful.