What Happens If Company Assets Are Sold Below Market Value Before Liquidation?

Selling company assets below market value before liquidation can create serious concerns for directors. A liquidator may investigate whether the transaction was made at an undervalue and whether it reduced the assets available to creditors. This can be especially important where assets were transferred to directors, family members or connected companies. If the transaction is successfully challenged, the liquidator may seek to recover the asset or require the recipient to repay its value. Directors should therefore obtain proper valuations, document the commercial reason for any sale and avoid transferring assets cheaply when insolvency is likely. Clear records can help explain why the transaction was considered reasonable at the time.

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