acquiring insolvent businesses

Although buying an insolvent business at a knock-down price can be a very shrewd and cost-effective way of acquiring assets or building market share, there is usually a much greater risk for the buyer when compared to a transaction involving a solvent seller. The insolvency practitioner will only be prepared to sell the assets “as seen”, without the benefit of any warranties as to condition of the assets, recoverability of book debts or even as to the ownership of the assets. You’ll need lawyers who can advise you what to look out for, what due diligence needs to be done, what constitutes market practice and (perhaps more importantly) what does not.

Time is very often of the essence in this type of transaction. Administrators are usually keen to sell on the business as quickly as possible in order to preserve as much value as possible. We can respond quickly and give you the best chance of completing the deal.

We can advise on the following:

• asset purchase agreements where the seller is an insolvent company
• due diligence – what you need to focus on and what you may have to take a view on
• directors’ personal liability – what happens if any directors of the buyer are also directors of the insolvent company? What happens if the buyer intends to use the name of the insolvent company?
• responding to enquiries from Administrators
• hive-downs to achieve a sale by share purchase and utilise trading losses
• the validity of transactions
• retention of title claims