Liquidation is quite a common occurrence. It is also frequently referred to as ‘winding up’ and is the process of a company coming to an end. Throughout the process, liquidators are brought in with the intention of assisting the company and helping them dispose of all of their assets, distributing the proceeds to creditors to whom they owe money alongside shareholders and staff. The assets of the company need to be sold (or ‘realised’) to do this.
How Can Assets Be Sold When a Company is in Liquidation?
When a company goes into liquidation, there are two different ways that assets can be sold. These are:
- Liquidators can market the assets and sell them through sales that have been pre-arranged
- There will be a liquidation auction, and the assets are sold to the highest bidder
What is a Liquidation Auction?
A liquidation auction is what happens when a liquidator puts together an auction where they will sell all of the company’s assets. The company’s assets include lots of different things which include inventory, computer equipment and furniture.
When assets are sold at auction, the whole process tends to be quite quick and easy as everything is usually sold within the first month of the company going into liquidation. This is beneficial for the business as it means they will have funds quicker that they can use to pay off their creditors, staff and shareholders. Businesses want to sell their assets at larger auctions because, as a general rule, the larger an auction audience is, the higher the price obtained for the different assets is.
Opinions will vary but generally, holding a liquidation auction is one of the most effective ways that you can get a good price for assets in a reasonably quick time. This is also beneficial for the liquidator in the winding up process because by holding an auction, they can’t be criticised for selling the assets cheaply. A reserve price can be placed on assets but other than that, the amount they go for is the amount that people at an auction are willing to pay.
Finally, an advantage of the auction process is that it is incredibly transparent. Anybody is able to bid on the goods, whether these are connected to the business or not. You tend to find that the liquidator will pass assets on to an auction house or a firm or chartered surveyors, and then they will be responsible for carrying out the auction on their behalf.
Things to Remember When Buying Cheap Stock
You can go to liquidation auctions as a means to buy stock for a reasonably low price. That being said, there are some things that you’re going to need to remember when doing this. These are:
- The stock that you’re buying used to belong to a company that went into liquidation, so does anybody actually want it?
- Think about the logistics if you are buying physical goods. Remember, there are going to be extra costs involved in storing goods, transporting them and checking their quality.
- If you are buying stock and it is partly sold, then it could end up being mismatched. Essentially, you might end up having too much of one type and then not enough of the other.
If you are still interested in attending liquidation auctions, then you should consider registering with some of the auction houses around the country.
What Are the Benefits of a Liquidation Auction?
Above, we touch on some benefits that come with holding a liquidation auction. Some of the others include but are not limited to:
When your business goes into liquidation and is attempting to sell its assets, it can be difficult ensuring that the right people see what you have to offer. When you hold a liquidation auction with a large auction house, you are increasing the number of people who will see what you’re selling and have a better chance of attracting the right buyers as a result. Getting a bigger customer base is the first step towards selling your assets and taking a significant chunk out of what you owe to staff, creditors and shareholders.
Stop Paying for Storage
When you are in liquidation, if you have stock that you have been unable to sell or items that are being stored, you need to worry about the additional costs that come with storage. As such, if you have a liquidation auction, then you are going to be able to sell off your assets at a much quicker rate. In doing this, you aren’t going to have any products left to store, which means that you don’t need to worry about paying for storage anymore.
You Can Ensure You’re Getting a Good Price
Sometimes when companies go into liquidation, they end up selling their assets for less than what they’re actually worth in a rush to get some money. When you sell at a liquidation auction, you can still do this, but you can set a reserve price that you won’t go lower than. As such, it means you have the benefit of selling assets quickly, but then you can also take solace in the fact that even at the quick speed they sell for, you are still going to be getting a good price.
Selling at a Liquidation Auction
When a company goes into liquidation, they need to sell its assets so that it can pay off any debts that they have. There are a couple of ways to do this, but one of the most prevalent is with a liquidation auction. This is where the assets are sold at an auction by the liquidators. They are good due to the fact they’re quick and transparent and can still result in businesses getting a fair price for their assets.
If your business is about to go into liquidation and you are interested in exploring the different ways that you could sell your assets, then you should consider speaking to Simple Liquidation. Our team of experts are on hand to help out with any and all liquidation queries that you might have so, please do not hesitate to get in touch.