Trading the Business Under a License Agreement While the Company is in Administration or Liquidation

Urgent business sales and business asset sales occur often once an insolvency appointment such as an administrator or liquidator has been made.

Sometimes, however, an urgent sale cannot be carried out, or there is the potential for a much better price in a longer sale process.

One of the difficulties this creates is funding the business while it continues to trade through the sale process, as generally the business will be worth more provided it continues to operate and trade.

Often the costs of funding the liquidator or administrator to continue to run the business is prohibitive during the period required to try and sell the business.

An alternative that we have used in our firm, and had some success with, is to set up an arrangement whereby the business is operated under a license agreement either with the directors or another entity to allow the sale process to be completed over a longer period of time.

This process can reduce the actual costs, particularly the administrators’ or liquidators’ costs and expenses of continuing the business, during the sale process.

It can also reduce the costs of the directors or other parties interested in the business in funding the business operations, particularly if the directors are going to be involved in the management of the business.

We have even used this process to allow a business to continue running for several months while the final terms of a complex sale agreement were finalised with one of the company’s competitors.

This ultimately resulted in the business being able to continue until after it was purchased by its competitor for a substantially higher price than would have been able to be recovered otherwise, as the only other alternative would have been to sell the business assets in an auction process.

If you would like to discuss this process, or any other part of the insolvency process in further detail, please contact Andrew Lambros .

Authors

Andrew Lambros is a Director at Bennett & Philp Lawyers

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