Lees Solicitors - Buying businesses from an insolvency practitioner - Ian MacGregor

Business Services News

Buying businesses from an insolvency practitioner - Ian MacGregor


Buying businesses from an insolvency practitioner - Ian MacGregor

The current financial climate has created and will continue to create opportunities to buy distressed businesses. Any buyer of such a business needs to be aware of certain key factors when acquiring the business of an insolvent company as a going concern.

The first steps will generally be similar to those taken in a sale of a non-distressed business. After the initial contacts with prospective buyers an insolvency practitioner will probably insist on a confidentiality agreement.

The sales process may include several stages, like a normal sale, but a prospective buyer will have an advantage if it can move rapidly in the due diligence stage by paring down the process and seeking to impose the minimum number of preconditions. It will also help if funding is already in available and in place. An insolvency practitioner will also be pleased if the buyer understands how insolvency sales work in practice.

Major factors to consider in relation to the sale agreement are:

  • Has the insolvency practitioner's appointment been validly appointed;
  • the likelihood of the complete absence from the seller and the insolvency practitioner of representations and warranties;
  • identifying, and delivery of, assets; and
  • price.

It should be noted and understood that insolvency practitioners will also go further than merely avoiding liability and will add extensive exclusion clauses.

A buyer will need to review and consider how to deal with third party agreements such as leases and hire agreements and will need to take a view on whether they need to be assigned or novated as these may be fundamental to the business.

In practical terms a buyer will need to consider:

  • the handling of retention of title claims;
  • the collection of book debts;
  • due diligence on land and buildings;
  • transfer of undertaking and pension scheme considerations for employees;
  • taxation generally;
  • possession of books and records.

This is a summary of the some of the things you ought to consider if you are thinking of buying the business or assets of a distressed company but if you would like us to act for you please contact a member of our Business Team on 0151 647 9381

Ian MacGregor

 

This article provides a summary of a recent case/change in law/news item. It is intended for general information purposes only and is not to be relied upon. It does not constitute legal advice and should not be treated under any circumstances as a substitute for legal advice. Lees Solicitors LLP does not accept any responsibility for any loss that may arise from reliance upon the information contained within this article. The copyright in this article is owned by Lees Solicitors LLP and permission must be sought before reproduction or publishing.


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