The procedure for selling perishable goods in insolvency
As mentioned above, perishable goods in an insolvency procedure means you must act fast.
Appointing the liquidator
In the event a winding up petition is issued, an insolvency practitioner may be appointed as a provisional liquidator, where there are significant perishable goods. This role involves the collection of company assets and the protection to ensure maximum returns for the creditors. Therefore, they will need to act fast to sell assets that are likely to deteriorate and affect the returns for those creditors, should the procedure be delayed. It’s important to note that perishable goods could make up a considerable proportion of the company’s value.
Moving quickly with a ‘centrebind’ procedure
A centrebind procedure refers to an accelerated process of the liquidation when the company’s assets are perishable goods. In essence, centrebind liquidation allows the liquidator to manage company assets and affairs, and begin selling those assets, before the approval of the business creditors.
For instance, during a regular creditors voluntary liquidation – a chosen route for many creditors – shareholders must receive 14 days notice for the shareholders’ meeting, unless more than 90% agree to the meeting take place within ‘short notice’. This meeting will, ultimately, discuss the winding up of the company, nomination of a liquidator etc. However, with a centrebind procedure, directors must issue a notice to their creditors, seeking approval for the resolutions mentioned above to be agreed on the day of the shareholders meeting. In the case of farms, for instance, this is particularly necessary should crops play a significant part in the return for creditors.
Perishable assets must be sold quickly to raise funds for the creditors before the business is, likely, liquidated. Technically, centrebind liquidation circumvents the issues that arise with the complex nature of company insolvency, enabling the liquidator to deal and dispose of the assets. It should be noted, however that since the introduction of the new insolvency rules in 2016, centrebinding is much less common as the notice period to creditors has been reduced.
The value of centrebind liquidation
Centrebind liquidation can be traced back to the 1960s, when Centrebind Ltd, won the case that enabled their liquidator to act on appointment by the shareholders, but before creditor approval.
Essentially, the value of expediting the liquidation process is to provide maximum returns to the creditors. Should the liquidator allows the company assets value to diminish, it would go against their primary objective. The advantages allow the liquidator to preserve and sell those assets before they lose their value.
If you do fear your company’s financial status and you are experiencing financial struggles, we urge you to seek immediate insolvency advice – particularly if your company does have perishable goods. Our business rescue experts will be happy to provide a free, informal, initial consultation and should the need arise, provide the assistance required for a fast turnaround.