Buying an insolvent business.

How much do I pay for an insolvent business?

This depends largely on negotiation. The buyer will be assuming the risk. Therefore the IP practitioner will be willing to sell the business for a reduced price but this has to be balanced with the selling business and the type of risk the buyer will be facing.

As a Solicitor I have to put a ‘different head on’ when advising clients who are buying a business from an insolvent company rather than a solvent one.

Obviously the contract is with an insolvent company. There is therefore a degree of risk as the appointed IP will only be a party mainly to facilitate the contract rather than having (other than a claim for negligence) any liabilities under it. Therefore any rights my clients has under the terms of the sale agreement will be limited as remember we are buying an insolvent company.

Buyer beware is very apt!

The seller via the IP practitioner will not provide any warranties or guarantees in fact it is likely to be the other way around i.e. the IP will seek warranties that the buyer will indemnify the IP Practitioner in the event that issues arise from the sale.

Retention of title

Its basic English law that any contract ought to provide that title to the goods will be retained by the seller until the seller has received full payment for the goods. This has to be considered by any solicitor for the buyer as the buyer will wish to ensure that he is buying the assets which will not be subject to unresolved retention of title claims. Again it is important to stress that the IP practitioner will not give any warranties or indemnities.

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