Can I legally sell assets before the company goes into liquidation?

Selling company assets before liquidation is legally permissible in some circumstances but can constitute serious misconduct in others, depending on why you're selling, to whom, at what price, and when. Directors have a duty to preserve company assets for the benefit of creditors once insolvency is likely, so asset sales must be carefully considered and properly documented. Legitimate reasons for pre-liquidation asset sales include: selling assets at fair market value to raise funds to pay creditors; disposing of surplus or non-essential assets to improve cashflow and avoid liquidation; selling the business as a going concern to preserve value and jobs; or converting assets to cash as part of a formal restructuring plan. However, several scenarios constitute misconduct. Selling assets at significantly below market value ('undervalue transactions') to connected parties, family members, or other companies you control can be reversed by liquidators and may result in personal liability—this is seen as asset-stripping to keep value from creditors. Making such sales within two years of liquidation (five years if to connected parties) gives liquidators strong grounds to challenge them. Preferring certain creditors by selling assets to pay specific debts while ignoring others can constitute unlawful preference, particularly if it benefits connected parties or gives certain creditors unfair advantage. Selling assets and then immediately placing the company into liquidation, particularly if you personally benefit from the sale, will be heavily scrutinized. Failing to obtain proper valuations or market the assets appropriately suggests you're not trying to maximize value for creditors. To protect yourself when selling assets before potential liquidation: obtain independent professional valuations showing fair market value; market assets properly to demonstrate you sought best price; document the business justification for the sale and show it's in creditors' interests; ensure sale proceeds are used appropriately for business purposes or creditor payment rather than personal extraction; take advice from insolvency practitioners before significant asset sales if insolvency is likely; and keep detailed records of the decision-making process and reasons for the sale. If you're considering selling assets to a new company you control (phoenixing), this requires extremely careful legal advice because it's an area of significant legal risk—such transactions must follow strict procedures to be lawful, and getting it wrong can result in personal liability for all company debts, director disqualification, and criminal prosecution. Pre-pack administration is the proper legal framework for directors to potentially buy back businesses through new companies, involving formal insolvency procedures, administrator oversight, and independent valuations. Simply selling assets cheaply to yourself or connected parties before liquidation without proper process is illegal asset-stripping. If creditors have already issued statutory demands or filed winding-up petitions, selling major assets may require court approval or creditor consent, and proceeding without this can be challenged. Once a winding-up order is made, directors have no authority to sell assets at all—control passes to the Official Receiver or liquidator. The key principle is that once insolvency is likely, directors must act in creditors' interests, not their own, which means preserving and maximizing asset values for creditor benefit rather than disposing of them for personal advantage. If you're unsure whether a proposed asset sale is appropriate, you should seek advice from an insolvency practitioner before proceeding—they can provide guidance on whether the sale is defensible, how to document it properly, and whether alternative approaches like administration or CVA would be more appropriate. The worst outcome is proceeding with an asset sale you believe is fine, only to have it challenged by liquidators after the company fails, resulting in personal liability to repay the undervalue and potential disqualification. Many directors don't realize that asset sales in the period before insolvency are among the most heavily scrutinized transactions, and what seems like sensible business planning can later be characterized as misconduct if not handled properly.