What Is A Liquidation Auction?

close up of gavel hammer against a grey background

When a company goes into liquidation, the interests of creditors need to be prioritised. As a result, the company’s assets must be sold in order to raise the necessary funds to put towards paying back creditors. There are two ways for assets to be sold when a company goes into liquidation. These are:

  • Liquidators market the assets and sell them through prearranged sales
  • A liquidation auction is carried out and the assets are sold to the highest bidder

A liquidation auction is the same as any other auction but with company assets listed as the items for sale, i.e. physical items the business owns such as unsold inventory, furniture or computer equipment. These assets are sold at a liquidation auction so that the business can repay its debts. 

The benefit of liquidation auctions, or insolvency auctions as they’re often referred to, is that they provide a process for disposing of assets quickly and efficiently. In most cases, the process enables stock to be sold within the space of a month of the company entering liquidation. 

Another benefit of selling assets via a liquidation auction is that the process is incredibly transparent, and means that the liquidator isn’t at risk of being criticised for selling assets at a lower price than their true value. Anyone can bid on the assets whether they’re related to the company or not. 

For individuals, buying stock from a liquidation action is a great way to buy items at a low price. Some of the stock will be new, but most commonly it is second-hand. 

back view of buyers raising hands to auctioneer during auction

Why Would A Company Go Into Liquidation? 

A liquidation auction is used to sell assets when a company decides to close its doors, but what are the most common reasons for this?

The Company Has Become Insolvent 

If a business has become insolvent and is unable to pay its debts as and when they fall due then the best option is often to liquidate the company. The process for this is known as a Creditor’s Voluntary Liquidation (CVL) and this is the best way to remove creditor pressure and ensure that the affairs of the company are wound up correctly. It’s essential to be proactive in facing economic challenges rather than enabling debts to escalate, as this could eventually result in the company being forcibly liquidated

Retirement/Change Of Business Path

Insolvency isn’t the only reason for liquidation. Many of the assets that you’ll see being sold at a liquidation auction are often from solvent companies where directors have chosen to liquidate voluntarily. This can be for many reasons, however the most common reasons are that directors wish to retire, have a change of business venture, or that the company has come to the end of its useful life. Closing the company via a Members Voluntary Liquidation (MVL) enables business owners to extract assets in the most tax efficient way whilst winding up the affairs of the company.

If you would like more information on what’s involved in the liquidation process, including details on how to liquidate your own company, please don’t hesitate to get in touch with our experienced team at My Liquidation today.

Contact Us

I'm looking for more information on ...


Choose from the options below