Benefits and Shortcomings of a UK Business Bankruptcy Auction

Perhaps you've wondered what happens to assets of a UK business if it closes its doors and seeks to dispose of them in a business bankruptcy auction. Here's a brief overview of the process, the players, and the pros and cons of this legal action.

How an Auction is Initiated

Business bankruptcies are presently governed by the Insolvency Act of 1989. An insolvent company can use this law to reorganize itself via an Administrative Order or a Company Voluntary Arrangement (CVA). The management of the company stays in place, the business continues operations under the watchful eye of a court-appointed administrator. If this process fails, the business goes into liquidation, a process where its assets are sold off to pay off its debts. Liquidation can happen at the discretion of either the company's management or of the bankruptcy court. At this point, the company is completely out of business. As part of the liquidation process, the administrator may order a bankruptcy auction.

Business bankruptcy auctions: Benefits for Buyers

Business bankruptcy auctions typically contain merchandise and materiel that's priced to sell. This means that there might not be a reserve on an asset being offered at a bankruptcy liquidation auction. A reserve is the minimum amount a seller will take for the item. In other words, a reserve is the point at which bidding at a bankruptcy auction begins. The absence of a reserve is just one of several benefits associated with this type of auction. It's possible to find exceptionally high quality items at UK bankruptcy auctions. There are even special purpose auctions that are restricted to a specific category of item, such as public auto auctions or seized property auctions. With the advent of online auctions, another whole set of benefits accrues to both the seller and the buyer, including the availability of high volume bulk quantities. A bankruptcy liquidation auction often benefits smaller buyers by affording them access to products that might not be available to them through normal channels. The stock may come from nationally known retailers and distributors and is often of the highest quality. Also, merchandise purchased at bargain prices at a liquidation auction can be resold at much higher prices, netting a tidy profit.

Benefits for Sellers

For sellers, events like seized property auctions or public auto auctions are an opportunity to convert business assets into cash and apply the proceeds to the business's debts. Again, because the Internet affords sellers access to a huge number of potential buyers, a successful auction is virtually assured. One online auction house reported to have over 60,000 registered bidders. And since Internet auctions occur 24 hours per day, 365 days per year on a "global trading platform," sellers are much more likely to dispose of their goods in a timely, profitable and secure transaction. Also, if a business needs to dispose of assets discreetly without devaluing its image or trade name, a bankruptcy auction is a perfect vehicle for doing so.

For UK buyers a business bankruptcy auction is the ideal place to purchase quality merchandise or equipment at market or below-market prices.

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