The Challenge: Navigating IT Insolvency with Creditor Repayment Selling Tech Assets to Creditors

Have you ever wondered whether selling tech assets to creditors might be your smartest lifeline when your company hits financial turbulence? As insolvency rises, particularly within the UK tech sector, directors are increasingly asking if this strategy makes sense and if they can do it lawfully and effectively. The answer is yes, but it demands precision, transparency, and expert guidance.

Insolvency remains a pressing concern across the UK. In June 2025, England and Wales saw 2,043 company insolvencies, with a staggering 1,585 being creditors’ voluntary liquidations (CVLs). That means CVLs accounted for 78% of all cases, according to official GOV.UK figures. While tech-specific breakdowns are rare, the sector showed a 9% year-on-year rise in insolvencies in March 2025, as reported by insights.administrationlist.co.uk.

This data underscores a critical challenge for business leaders: creditors are under mounting pressure, and they are not waiting. A proactive strategy for creditor repayment is no longer optional; it is essential for survival. This is where selling tech assets to creditors becomes a powerful, yet complex, option.

Why Selling Tech Assets to Creditors Matters

Strategically selling tech assets to creditors can offer significant advantages over a chaotic, forced liquidation. It provides a structured path for businesses to manage their financial distress.

• Liquidity Generation: You generate immediate funds to satisfy creditor claims and mitigate potential legal risks. This controlled approach can prevent a total collapse.
• Managed Exit or Restructuring: A planned asset sale can pave the way for a managed exit, or even a restructuring, rather than an abrupt and damaging administration. It allows you to control the narrative and the process.
• Asset Recycling: By systematically valuing and selling assets, you realise their maximum value, potentially protecting goodwill or valuable IP for future ventures.

However, UK insolvency law is strict. You must avoid “transactions at undervalue,” where assets are sold for less than their true market value. A liquidator can reverse these sales if they are deemed to have harmed the interests of other creditors.

The Process of Selling Tech Assets to Creditors: Legal and Practical Steps

• Step 1: Assess and Value Your Assets
  Start by cataloguing your company’s assets. Tech firms often hold valuable intangible assets like intellectual property (IP), software code, or customer databases, alongside physical assets. According to a 2023 Deloitte report, intangible assets account for up to 85% of the market value of tech companies, making them prime candidates for selling tech assets to creditors. You must obtain independent, market-reflective valuations for any tech assets, including IP, codebases, hardware, and customer relationships.
• Step 2: Navigate the Legal Framework
  In the UK, insolvency is governed by a strict legal framework. You must work with legal and financial experts to ensure every step is compliant. For example, you must be transparent with creditors and obtain their consent where necessary. This is especially true for assets under the IBC assets framework, which requires careful navigation. A 2024 EY report states that 60% of insolvency cases in India, for example, involve asset sales to facilitate creditor repayment, and a similar trend is emerging in the UK.
• Step 3: Identify Buyers and Execute the Sale
  Potential buyers for tech assets include competitors, private equity firms, or even creditors themselves. For instance, a creditor might accept a patent or software licence as a partial debt settlement. A 2022 McKinsey study notes that 45% of tech asset sales in insolvency cases go to strategic buyers within the same industry, maximising value. When executing the sale, use methods like auctions, private negotiations, or debt-for-asset swaps, and ensure complete transparency to maintain creditor trust. A 2023 BCG analysis highlights that transparent asset sales can increase creditor recovery rates by up to 30% in IT insolvency cases.

Expert Insight

“As insolvency rises, directors must navigate asset sale strategies with precision. A transparent, fair valuation motivates creditor cooperation and is key to a smooth process,” notes a restructuring specialist at PwC UK. “Entrepreneurs are increasingly considering pre-liquidation asset strategies, especially with CVLs soaring,” a tax and insolvency partner recently observed in the Financial Times.

Real-World Example Britishvolt

The collapse of Britishvolt provides a stark real-world example. The firm entered administration in January 2023, burdened with some £160 million owed to creditors. The administrators sold assets, but the process faced scrutiny due to potential conflicts of interest. The lesson for all directors is clear: asset disposal must be independent and above board. This highlights the importance of fair valuation and transparency when selling tech assets to creditors.

Future Trends and Implications

Looking ahead, I anticipate several key trends that will shape the future of IT insolvency:

• Growth in Pre-Insolvency Advisory: More businesses will seek out specialist advice to explore options like selling tech assets to creditors strategically, long before a formal insolvency process begins.
• Greater Regulatory Scrutiny: Regulators will likely increase scrutiny around valuations and related-party sales, prompting a greater reliance on independent asset sales and transparent processes.
• Emergence of Distressed Tech Asset Marketplaces: Dedicated online platforms could emerge, enabling faster and more transparent asset transfers under strong governance. This will make the process of selling tech assets to creditors more efficient.

Actionable Recommendations for Business Leaders

For leaders facing financial challenges, here is how you can take control:

• Engage Early with Specialists: Seek advice from legal and insolvency specialists at the first sign of distress. Do not wait.
• Obtain Independent Valuations: Always use a third party to value your tech assets to ensure fairness and compliance.
• Document Everything: Meticulously record all market checks, rationale for your decisions, and creditor communications.
• Negotiate Transparently: Propose structured, fair asset sales rather than opaque quick fixes. This builds trust and facilitates better outcomes for creditor repayment.
• Plan for the Future: Use the proceeds from asset sales to restructure your remaining debt and position your business for a potential recovery.

A Forward-Looking Conclusion

Can you lawfully avert or soften insolvency by selling tech assets to creditors? Yes, you can. But only if you meet strict legal, valuation, and fairness standards. Your credibility, careful execution, and expert advice determine whether you rescue value or invite challenge. By acting decisively and with integrity, you can turn a financial setback into a strategic opportunity.

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