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When a Liquidator is appointed to a company, they have a duty to collect and realise the company’s assets for the benefit of the Liquidation.

In most cases, these assets are subject to company leases, hire purchases or any other finance agreements that typically contain a personal guarantee by company directors. So, what will happen with leased assets in a Liquidation?

If a company has any of the above (i.e. assets subject to finance), a Liquidator would undertake an equity analysis to compare the current market value of the leased asset versus the total payout figure of the finance owing.

If the value of the leased asset is higher than the payout figure (positive equity position), a Liquidator will look to sell the asset for the benefit to the Liquidation.

If the payout figure is higher than the leased asset value (liability position), a Liquidator will have no interest in it (i.e. the Liquidator will formally disclaim any interest in the asset).

If directors want to retain the leased asset and there is a positive equity position, the Liquidator may sell the positive equity position to them. From this point, directors are required to continue servicing the agreement with the finance company. 

So, what happens if a Liquidator disclaims their interest?

Important Note: Should the size of any shortfall be significant, the guarantor may face bankruptcy or the loss of personal assets (home, motor vehicles, shares, etc.).

Alternatively, if the guarantor is able satisfy the finance company, the guarantor, may retain possession of the leased asset, however, if the guarantor considers selling the leased asset, clear title will not be provided to any purchaser unless the finance company agrees.

For more information about leased assets or if you feel your company can no longer continue to pay lease obligations, What is Liquidation can help you, contact us today.