When is an Asset not an Asset?

I am always surprised at how difficult the question:  “Does the company have any assets?” can be to answer.

For many that call us, they have identified a price point they like, and the purpose of the call is to convince us that the facts of their company fit our bronze service level.  For those who haven’t seen it, please go to our Creditors Voluntary Liquidation page.

The problem of course is that, irrespective of the value a director attributes to the assets, if the Company owns something, a Liquidator must ensure a transparent valuation and disposal process. If the assets prove valueless then the liquidator is entitled to disclaim the assets, but in either case it is not for the Director or his Accountant to determine the strategy to be adopted. Many have a problem with this.

Some of the more elaborate explanations I have received from Directors and their Accountants to explain why a particular Company which had assets registered at Companies House now had none are:

- I have written down the assets to £nil: I am sorry, but if the Company has something then we need to establish what has happened to it.  Explanations such as lost, fell apart or disappeared in a flood/fire are not well received.

- The Company has a Bounce back loan, some CT and VAT liability. There was no PAYE scheme and no assets: Any competent Bookkeeper or Accountant will frown at this point. The nature of these liability types (either Covid monies or liabilities derived from profits) means that it would be unlikely that there was not an associated asset. Most likely this will be an overdrawn Directors Loan Account, i.e., monies owed by the Director to the Company. Irrespective of whether the Director believes that he should repay the debt, this is still an asset of the Company which will require resolution. My articles on this topic are available here.

- I took a Bounce Back Loan and lent it to my other Company. That debt is uncollectible and has now been written off: As will hopefully have been established by now, it is not for the Director to take decisions such as this in the months leading up to Liquidation, particularly if the Director has an interest in the benefitting company.  Whatever you might think the Courts and the Insolvency Service take a very dim view of such conduct.

- I know Companies House says there are material assets, but the Company has never had any assets and I don’t know what they are. It was my Accountant who did the Accounts and I just signed them:  In this case we encourage the Client to speak with his Accountant to determine what it was they have historically signed off on. It cannot be Bronze if the Director does not know the answer.

There are many variations along the same lines,  but our bronze service is very precise in that it assumes the Director can explain why the Company has no assets and can complete the statutory requirements that we need.  For those that think the service covers our dealing with an Accountant who you have not paid then I am sorry.  We certainly can deal with your Accountant, but this very much falls under our silver service level.

Please do get in touch to discuss our Bronze, Silver or Gold level services

Jeremy Frost, Insolvency Practitioner and CEDR accredited Mediator Director of Frost Group Limited

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