Asked by: Lynn Jamison
Asset stripping involves taking company funds or assets while leaving behind the debts. Sometimes directors then transfer only the assets of a company to another similarly named company, not the liabilities, leaving a dormant company which is put into liquidation. This is sometimes also referred to as ‘phoenixing’.
What does stripping a company mean?
What Is Asset Stripping? Asset stripping is the process of buying an undervalued company with the intent of selling off its assets to generate a profit for shareholders.
Which refers to the process of selling off the assets of the company?
Liquidation generally refers to the process of selling off a company’s inventory, typically at a big discount, to generate cash. In most cases, a liquidation sale is a precursor to a business closing. Once all the assets have been sold, the business is shut down.
Is asset stripping legal UK?
In the United Kingdom
The process of asset stripping is not an illegal practice. If a corporate raider sells the target company’s assets individually and pays off its debts the financial regulators have no room for investigation.
How does asset stripping work?
Asset stripping refers to the process of purchasing an undervalued company and then separately selling its assets. The premise of asset stripping is to sell the individual assets of the acquired company at an aggregate higher price than selling the whole company by itself.
Is asset striping legal?
The process of asset-stripping is not an illegal practice. If a corporate raider sells the target company’s assets individually and pays off its debts, then the Financial Services Authority or any legal body have no room for investigation. However, some firms perform the process illegally.
What happens when a company liquidates?
Liquidation in finance and economics is the process of bringing a business to an end and distributing its assets to claimants. It is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations when they are due.
What assets can be liquidated?
The liquidated assets definition refers to anything of value that is sold off to pay creditors when a business is closing or restructuring.
Assets can include:
- Vehicles.
- Real estate.
- Raw materials.
- Equipment.
- Financial investments.
- Store fixtures.
- Machinery.
- Decorations such as art, wall hangings, and rugs.