Frequently Asked Questions
Do we take on the company’s liabilities?
No, once a company goes into Administration, Administrative Receivership or Liquidation all of the company’s liabilities stay with the company, with the exception of the employees TUPE claims, which will transfer to the phoenix company if there is a going concern sale.
If you wish to take over assets subject to hire purchase or lease agreements it will be up to you to negotiate new terms with the HP or leasing companies.
Have we got to buy everything?
It is possible to exclude some assets from your offer.
How much will we have to pay for the business and assets?
This will depend on the current market conditions relating to the business sector.
An Insolvency Practitioner is required to achieve the best possible price for the business and assets and will be guided by the agents who undertake the professional valuation, as well as taking a number of other factors into consideration.
We can provide guidance regarding the anticipated expectations of the Insolvency Practitioner and negotiate the purchase price on your behalf.
Can we pay by deferred consideration?
In certain circumstances the Insolvency Practitioner may consider accepting part payment by deferred consideration, however, a guarantee or some form of security is normally requested to support the deferred amount.
We can help with the negotiations regarding the payment of the consideration.
What warranties will we get in respect of the assets we are purchasing?
The Administrator, Administrative Receiver or Liquidator will only contract to sell whatever the company has good title to and will not give any warranties or guarantees regarding the ownership of the assets you will be purchasing, however, this is reflected in the price you will be paying for the business and assets.
Will the phoenix company have an automatic right to trade from the company’s premises?
Freehold premises
- If the phoenix company is not purchasing the freehold property it may be possible for the company to occupy the premises under licence whilst they are marketed for sale.
- If the phoenix company is purchasing the freehold property, it is not normally possible to complete the sale of the property at the same time, the company would therefore be granted a licence to occupy the property until the sale is completed.
Leasehold premises
- The phoenix company would not normally have an automatic right to take an assignment of the lease, however, the Administrator or Administrative Receiver may grant a licence to occupy whilst you enter into negotiations with the landlord.
Do I have to tell the suppliers?
Yes. If they are owed money by the failing company they will receive formal notice of the administration, administrative receivership or liquidation of the company. You are also required to advise them of the involvement of the directors of the failing company in the phoenix company, as outlined in more detail under the restrictions on the use of the company name.
Do I have to tell the customers?
No, however, if they owe the failing company money then the Administrator, Administrative Receiver or Liquidator will write to them requesting payment of the outstanding amount unless you purchase the debtors.
It is sometimes possible to enter into an agreement with the Insolvency Practitioner to assist in the book debt collection, which would mean that you could manage the ongoing relationships with customers.
This can often enhance book debt realisations which could be advantageous if you have given any personal guarantees in respect of the company’s borrowings.
What happens to the employees?
If the business is purchased as a going concern, all of the employees and their accumulated rights transfer to the new company. It is not possible to “cherry pick” which employees you would like to transfer.
We would strongly recommend that legal advice is taken regarding the employees’ rights and the potential liability to the new company.
How long will the process take?
If necessary the whole process can happen within a few days and is driven by the financial pressures that the failing company is experiencing and the need for the Insolvency Practitioner to protect the assets for the creditors. If there is significant creditor pressure immediate protection of the company’s assets can be put in place whilst the strategy is implemented.
We have access to funders who understand the pre-pack process and are able to release funding within the short timescale required.
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Sterling Capital Reserve Ltd
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