In an insolvency procedure an asset can simply be described as resources or an item of value which is owned by a company. Business assets are those that are used by a company to generate revenue and profit.
They can include things like cash, inventory, equipment, land, and intangible assets such as patents and copyrights. In an insolvency procedure, businesses are generally required to sell off their assets in order to repay creditors.
In some cases, the proceeds from the sale of assets may not be enough to cover the debts owed, and creditors may receive only partial payment. However, in other cases, the sale of assets may generate more money than is owed, and shareholders may receive a portion of the proceeds.
The distribution of the proceeds from the sale of assets in an insolvency procedure is determined by the law of the jurisdiction in which the company is located.
Examples of business assets
This can encompass numerous things; however, for an average business its assets will typically include items such as:
- Land and/or property
- Vehicles
- Machinery and/or plant equipment
- Stock (either finished or raw materials)
- Fixtures and fitting
Intangible assets are nonphysical assets that have value but cannot be seen, touched, or held. Examples of intangible assets include intellectual property, such as patents, copyrights, and trademarks; customer relationships; and goodwill. Intangible assets are often the most valuable assets a company has, even though they may not appear on the balance sheet.
For example, Yahoo! was sold to Verizon in 2017 for $4.48 billion. However, the bulk of this value came from Yahoo!’s customer base and brand recognition, both of which are intangible assets. Therefore, it is important to consider intangible assets when valuing a company.
When a company enters the insolvency process, the liquidator will aim to sell the businesses assets in order to repay creditors. These will include obtaining a valuation of your assets. This can be done by hiring a professional appraiser or by contacting a local auction house.
Once the IP has a valuation, they will set a reserve price, which is the minimum amount you are willing to accept for your assets. Selling your business assets in liquidation can be a complex process, but if you take the time to plan ahead, it can be a successful way to get the best return on your investment.
The funds obtained through the sale of company assets can also be used to cover the fees charged by the insolvency practitioner for liquidating the company rather than the director having to pay these from their own personal resources
Business v personal assets
In business, there is a important distinction between personal and business assets. Personal assets are any property or possessions that are owned by an individual. Business assets, on the other hand, are any resources that are owned or controlled by a business. These can include things like cash, inventory, equipment, land and commercial property.
The key difference between the two is that personal assets are used for personal purposes, while business assets are used to generate revenue for the company. Because of this, businesses must be careful to protect their assets from personal liability. For example, if a business owner uses company funds to pay for personal expenses, they could be held liable for misappropriating company funds.
Similarly, if a business owner uses company property for personal gain, they could be accused of self-dealing. In both cases, the business owner would be putting their personal assets at risk. As a result, it is important for business owners to understand the difference between personal and business assets, and to take steps to protect their business interests.
Sole traders
Sole traders need to understand that the difference between how personal assets are treated with limited companies and and a sole trader. Personal assets are protected only for those operating under the company structure of a limited company.
Should a sole trader fall behind on their payments to creditors then any assets they own personally can be seized in order to repay those you owe money too.
This is legally there is no distinction between yourself and your sole trader business. As a sole trader your email responsible for any debts you accrue, even if these are in the course of your work.
How can we help
If your company is struggling and need further help or assistance with company liquidation, please contact us on the above telephone number or simply complete the online enquiry form.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.