A Bankruptcy Lawyer’s Blog

Some Reasons For a Bankruptcy Auction Sale

You may have wondered how company assets might end up in a bankruptcy auction sale in the UK. If a company behaves in a manner counter to sound business practice, then a bankruptcy liquidation auction is virtually inevitable. Here are some common reasons a company might find itself forced to into a bankruptcy auction.

Reason #1 – Cashflow

Simply put, if a company cannot meets its financial obligations, then poor cash flow may be the culprit. Failure to pay monies deducted from employee paychecks to the appropriate authority, such NIC or Inland Revenue is a warning sign. A company’s board of directors is required by law to act to remedy these situations. A business bankruptcy auction should be the last resort.

Reason #2 – Balance Sheet

This reason for an auction goes along with cash flow and simply means that a company owes more debt than the value of what it owns (assets). This can be a slippery slope in that, a company can appear to be sound by overvaluing its inventory or underestimating the amount of monies it believes it can collect from entities that are indebted to it. This deceptive practice doesn’t present a true picture of the company’s financial situation. It often leads companies into bankruptcy auction sales.

Reason #3 – Legal Action

A company whose creditors have obtained legal court judgments against it is very definitely on the road to insolvency and to UK bankruptcy auctions. In fact, creditors can petition the court to compel the company to liquidate its assets. In addition, if the creditor can obtain a “statutory demand” for debts in excess of 750. If the debt remains unpaid after 21 days of obtaining the statutory demand, the creditor can petition for compulsory liquidation.

A UK bankruptcy auction sale is never a pleasant event for a failed company. It can, however, provide bidders with a rich source of property priced substantially below market value.

John Fabrigo is an certified auctioneer and a consultant with governmentauctionsuk.com

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