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Can a director sell an insolvent company?

One of the current frequently asked questions PBC are receiving at the moment is whether a director can sell their company when it is insolvent. There are several factors which affect the answer, including those discussed below.

Normally such a sale will involve the transfer of the business and assets of the company to a new entity but occasionally the directors will be able to secure a sale of the shares where the purchaser inherits all the debts of the company. Whilst these sales are unlikely if the company is insolvent, a director should establish whether such a possibility exists in the first instance.

While a share sale is invariably more ideal for creditors, in the majority of cases a sale will only involve the business and assets. Here, directors need to ensure the assets are sold at a fair value and therefore we would always advise that an independent, professional agent is engaged to undertake such a valuation and are likely to provide some guidance on how to sell the business and assets with minimum criticism of the directors. Failure to get this correct may result in claims being brought against the directors at a later date, so it is important.

A further complication are the provisions about the re-use of a prohibited name which apply when a company enters into insolvent liquidation. These state that an individual who has acted as director in the twelve months prior to liquidation cannot be involved in the “promotion, formation or management” of a company or business with a similar name to that of the company which entered into liquidation. The rules also extend to cover trading names and branding. Any individual in breach of these rules is committing a criminal offence and faces the prospect of personal liability for the debts of the successor business.

The sale of business and assets of an insolvent company can be the proverbial minefield, combining values, director duties and creditor interests. At PBC we can assist with this process to ensure you do not tread on any of those mines.

If you require any advice or assistance on any insolvency-related issue, then please contact PBC Business Recovery & Insolvency to discuss and advise on your situation at our offices in Northampton (01604 212150) and Milton Keynes (01908 488653) or email to Alternatively, visit for further information.