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Top tips: buying from an insolvent company

Dentons’ restructuring, insolvency and bankruptcy group considers the legal, commercial and practical issues when buying from an insolvent company.

Often it is in the interests of both buyer and seller to negotiate and complete a deal as soon as possible to preserve value in the business before goodwill is tainted with any stigma of insolvency or key employees, suppliers or customers leave the business.

Buying the business leaves most liabilities with the old corporate shell. You can buy the shares if you are interested in tax losses but you would need to do a lot of due diligence to find out if tax losses are available and often there isn’t time. You can sometimes hive down assets into an SPV and buy the shares in that. Share sales do depend on the person in control of the target being in control of the parent as well to approve any share sale…

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