If your company is insolvent and you need to sell assets to raise cash, it’s crucial to act carefully. Insolvency Practitioner, Molly Monks of Parker Walsh, recommends the following to help directors protect themselves while complying with legal obligations.

1. Seek Expert Guidance Early

The first step is to consult an Insolvency Practitioner, such as Molly Monks at Parker Walsh, before selling any assets. Insolvent company directors are under close scrutiny, and mistakes can lead to personal liability or even disqualification from future directorships. Early guidance ensures your actions are legally sound and that creditors’ interests are considered.

2. Confirm Asset Ownership

Before selling anything, check that the assets actually belong to the company. Suppliers may retain ownership until payment is made (retention of title clauses), and secured creditors, such as debenture holders, may require consent. As Molly Monks emphasizes, only assets that are fully owned by the company and free from restrictions should be sold.

3. Determine Fair Value

Selling assets at fair value protects directors from allegations of improper disposal, especially if the buyer is a related party (family, friends, or associates). Molly Monks recommends engaging an independent valuer or surveyor:

• For high-value or numerous assets, a full on-site valuation with an itemized stock list is recommended.

• For minimal assets, prepare a stock list, take photographs, and obtain a remote valuation.

• If the valuer identifies higher value than expected, a more detailed assessment can be arranged.

Following this approach ensures your sales are defensible and transparent.

4. Document the Sale Properly

Once you know the fair value, ensure the sale is fully documented. This may include:

• A sales invoice (including VAT if applicable)

• A formal sale agreement for high-value or contentious assets

If liquidation is imminent, Molly Monks advises letting the liquidator manage the sale to remove any risk from directors. If an urgent sale is unavoidable (for example, to avoid losing premises), ensure the sale is at fair value, guided by an insolvency practitioner, and properly documented.

5. Use Insolvency Practitioners and Agents

Insolvency Practitioners oversee asset sales, liaise with valuers or agents, and ensure transparency for creditors. According to Molly Monks, their involvement provides reassurance that assets are not sold at undervalue or misappropriated and protects directors from future liability.

6. Keep Clear Records

Maintain comprehensive records of every step: valuations, advice received, sales documentation, and correspondence. This demonstrates that you acted responsibly, prioritized creditors, and complied with the law. Molly Monks emphasizes that thorough documentation is your best protection if any questions arise later.

Summary for Directors

To safely sell assets when your company is insolvent:

1. Contact Molly Monks at Parker Walsh or another Insolvency Practitioner before taking action.

2. Verify ownership and confirm there are no restrictions on the assets.

3. Obtain an independent valuation appropriate to the asset type and value.

4. Ensure all sales, especially to related parties, are at fair value and documented.

5. Let the liquidator handle sales when possible.

6. Keep clear, detailed records of every step.

Following these steps minimizes risk and ensures compliance with legal obligations while protecting both the company and its directors.