Introduction
Although distressing for the owners and employees, an insolvent
businesses can represent an opportunity for a buyer. One of the
benefits of insolvency is that it can release the underlying
business (which may be profitable in itself) from debts and give a
buyer the opportunity to make a fresh start.
In doing so, however, buyers should beware of the employment law
risks represented by any employees who remain in the business
through the insolvency process.
The Acquisition
An insolvent business is usually acquired by way of an asset
sale, eg a sale of the assets of the business such as property and
machinery, and an assignment of the business' sale and supply
contracts and goodwill. This process leaves the corporate owner of
the business with a debt-ridden shell which its administrators can
wind down in an orderly fashion.
