Buying back company assets after insolvency can offer a fresh start, but UK directors must follow strict rules to avoid serious consequences. Chris Worden explains the right way to approach this complex process.
- Always get an independent valuation for assets
- Communicate with the insolvency practitioner
- Pay fair market value for all assets
- Follow rules on company names (Section 216)
- Document every step in writing
- Seek professional advice before acting
Why Directors Get It Wrong
Many directors try to 'phoenix' their companies without professional help, risking disqualification and personal liability. Mistakes often include undervaluing assets, failing to get proper valuations, or ignoring legal requirements.
Steps to Buy Back Company Assets
1. Speak to an Insolvency Practitioner
Before any sale, consult the insolvency practitioner you plan to appoint. They are legally bound to ensure assets are sold for the best price to repay creditors.
2. Get an Independent Valuation
Hire a credible agent to value all assets, including plant, machinery, contracts, goodwill, and intellectual property. This protects you from accusations of undervaluing.
3. Submit a Formal Offer
Make your offer in writing, referencing the agent's valuation. Offers close to the 'in situ' value are less likely to be challenged.
4. Follow Section 216 Rules on Company Names
After liquidation, you cannot use the same or similar company name for five years unless you qualify for a Section 216 exemption. Options include:
- Having a similar name already trading for 12+ months
- Applying to court for permission (can be costly)
- Buying the name and goodwill from the insolvency practitioner and notifying creditors
Common Mistakes to Avoid
- Selling assets before appointing an insolvency practitioner without a valuation
- Underpaying for assets
- Ignoring company name restrictions
- Not seeking professional advice
Benefits of Doing It Right
- Retain key assets and staff
- Preserve customer relationships
- Start afresh without legacy debts
- Demonstrate integrity and transparency
Key Takeaways
- Always get an independent valuation
- Communicate openly with the insolvency practitioner
- Pay fair market value for all assets
- Follow Section 216 rules on company names
- Document every step and seek professional advice
FAQs
- Can I buy back my company assets before insolvency?
- Yes, but you must get an independent valuation and pay fair market value. Always consult the insolvency practitioner first.
- What happens if I underpay for assets?
- The insolvency practitioner can void the sale, reclaim assets, or make you personally liable for the shortfall.
- What is Section 216 of the Insolvency Act?
- Section 216 restricts directors from using the same or similar company name for five years after liquidation, unless exempted.
- How do I get a Section 216 exemption?
- You can qualify by already trading under a similar name, applying to court, or buying the name from the insolvency practitioner and notifying creditors.
- Why should I seek professional advice?
- Professional advice ensures you follow the law, avoid personal liability, and maximise your chances of a successful restart.
If you need tailored advice on buying back company assets, contact our team today for a confidential discussion.
