Insolvency and perishable goods – why you need to move fast

The importance of moving quickly to realise the value of perishable goods

If your business faces insolvency, liquidation might be unavoidable if no other options exist. This involves closing the business after selling all its assets. 

Preserving the value of perishable goods is crucial when they contribute to the company’s worth. Whether a creditor pushes for liquidation or you and other directors opt for Creditors’ Voluntary Liquidation (CVL), the tight timeframe to dispose of perishable goods before deterioration is a key consideration.

 

Appointment of the Liquidator and Perishable Assets

At times, the Official Receiver (OR) becomes the provisional liquidator, responsible for gathering and safeguarding assets. While the OR can sell perishable assets, a challenge arises if a winding-up order is not eventually granted.

In a Creditors’ Voluntary Liquidation chosen by directors and shareholders, safeguarding asset value is crucial. This significantly impacts maximising creditor returns, particularly when perishable goods contribute significantly to the company’s value.

 

Fast-tracking the Realization of Value from Perishable Goods

When a liquidator is appointed before obtaining creditor approval, known as a ‘Centrebind’ procedure, it speeds up proceedings and prevents serious delays, ensuring maximum creditor returns.

The liquidator can take essential steps to dispose of assets, including perishable goods, that might deteriorate while awaiting creditor approval.

 

Handling Perishable Goods Without Approval from Creditors

Perishable goods, considered assets, must be swiftly sold to generate funds for creditors during business liquidation. In a ‘standard’ CVL, the liquidator seeks creditor approval, a process that takes time due to the complexity of company insolvency.

Centrebind liquidation addresses this by allowing the officeholder to handle and dispose of assets without prior creditor sanction or court order. In cases like a farm going into liquidation, valuable assets like crops could significantly contribute to creditor returns.

However, the liquidator can only dispose of deteriorating assets with court sanction.

 

Read More: 

• Are Informal Company Creditors Arrangements Worth Your Time

• What are bailiffs’ powers with limited companies in debt

• How Does Company Insolvency Affect Preference Shares

• What can a bailiff legally take from my home or workplace
• Are Informal Company Creditors Arrangements Worth Your Time

 

Advantages of Speeding Up a Liquidation Procedure

A liquidator’s duty is to maximise returns for all creditors. Allowing a significant portion of a company’s asset value to diminish goes against this objective.

Centrebind liquidation emerged in the 1960s when Centrebind Ltd won a court case, enabling the liquidator to act on appointment by shareholders before receiving approval from company creditors.

While the legal loophole introduced by the Centrebind case has been closed, the advantages persist in swiftly securing funds for creditors in specific circumstances while preserving asset value.

 

For more information on insolvency and dealing with perishable goods, contact our expert team at Vanguard Insolvency. As turnaround specialists, we can offer the professional assistance your distressed business needs. We provide same-day consultations and operate from over 100 offices.