What-is-deemed-a-business-asset-in-an-insolvency-procedure

What is deemed a business asset in an insolvency procedure?

An asset is essentially a resource or valuable item owned by a company. For an average business, assets usually include: 

  • Land and/or property
  • Vehicles
  • Fixtures and fittings
  • Machinery and/or plant equipment
  • Stock (finished or raw materials)
  •  

Intangible items, those without physical presence, are also considered business assets. These may include the company’s website, patents, goodwill, and intellectual property, depending on the business type.

In the liquidation of an insolvent company, the appointed insolvency practitioner aims to sell or ‘liquidate’ valuable assets. The proceeds from the sale are then distributed to outstanding creditors. Secured creditors with a charge receive preference, while unsecured creditors receive a portion of any remaining funds. The funds from asset sales typically cover the fees of the insolvency practitioner, avoiding the director having to personally finance these expenses.

 

Business assets versus personal assets

For an asset to be sold in an insolvent liquidation, it must be owned by the company and primarily used for business purposes. A property that serves as the company director’s primary residence is not considered a business asset and cannot be sold to repay creditors. Limited liability status grants a limited company its own entity, distinct from its directors. Consequently, the company is solely responsible for its debts, and repayment is its own obligation.

 

What about sole traders?

Understanding how personal assets are handled differs for limited companies and sole traders. Limited companies offer protection for personal assets. However, for sole traders, falling behind on payments to creditors can lead to the seizure of personal assets to settle debts. In the case of sole traders, there’s no separation between personal and business entities. All debts, even those incurred during work, are the sole trader’s responsibility.

 

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How Vanguard Insolvency can help

If your company is facing financial difficulties and you want information about company liquidation and the fate of your business assets, reach out to Vanguard Insolvency today. Schedule a free, no-obligation consultation with a licensed insolvency practitioner. This session will help you explore options for your company and determine the most suitable path ahead. Call us today.

Senior Partner at Vanguard Insolvency Practitioners | Website | + posts

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.