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Requesting Representations and Warranties from a Liquidator in a Sale and Purchase of Assets


Assets are often purchased by companies as part of its corporate exercise. The seller and buyer (“Parties”) to a sale and purchase of assets would enter into a sale and purchase agreement mutually negotiated and agreed by the Parties. A sale and purchase agreement set out all the details, terms and conditions of the sale including the rights and obligations of the Parties.

One of the salient terms of a sale and purchase agreement is the representations and warranties by the Parties. Both the seller and the buyer to a sale and purchase will provide certain representations and warranties to disclose material information in respect of the proposed transaction. However, more often than not, the extent of representations and warranties given by the seller would be more extensive as the seller would be required to include information about the assets in question.

Representations and warranties are key components of a purchase agreement as they minimize the risks of the parties. Although the scope of representations and warranties to be provided by the Parties may differ from one another, depending on the type and value of the transaction, they generally set out further information in relation to the assets to be purchased and are often relied upon by buyers to protect themselves against any unknown risks. It is important to set out the scope of representations and warranties to be provided as any breach of representations and warranties would form a basis for the innocent party to terminate the transaction and/or claim for damages.


When does a liquidator come into play in a sale and purchase of assets?

Liquidation may take place for a variety of reasons. Once a company goes into liquidation, whether compulsory or voluntary, a liquidator is often appointed.

Upon the appointment of the liquidator, the liquidator should assume the responsibility of taking custody and control of all the properties in which the company is, or appears to be entitled. It is one of the main principal functions of the liquidator to collect and realize the company’s assets at the best possible price in a manner that is the most advantageous to the company. This is apparent as, the whole objective of winding up a company is to liquidate the assets of the company so that the proceeds of the sale can be utilised to satisfy the liabilities of the company.

The power conferred to a liquidator to sell assets of a company stems from the Companies Act 2016. In the case of a voluntary winding up, the powers of a liquidator are set out in the Eleventh Schedule of the Companies Act 2016 and for involuntary winding up, ie, in circumstances where the Court has ordered for a winding up of a company, the powers of a liquidator are embedded in the Twelfth Schedule in the Companies Act 2016.


The disparity between purchasing assets from a liquidator and a regular sale and purchase.

In a regular sale and purchase agreement, the terms and conditions set out in the agreement usually offers protection for both sides of the party, i.e., the seller and the buyer. Almost in every sale agreement, there will be representations and warranties which will be the underlying matters of the contract. However, the position is not the same when it comes to the sale of assets of between a liquidator and a buyer. As mentioned above, the main objective of appointing a liquidator in the sale of assets of a company who has gone into liquidation is to liquidate the assets of the Company to set off and pay off the company’s liabilities owed to its creditors. Therefore, the liquidator may very well not make the terms of the sale as advantageous to the buyer as it is to the company.

Moreover, upon the conclusion of the sale of all the assets of the company, the company concerned will usually be made to cease to exist. This will mean that there will be no entity whatsoever to support any indemnity or guarantee in relation to the assets that were sold.


Issues that arise from a sale and purchase agreement with liquidators.

In most cases, the terms of the sale agreement between the liquidator and the buyer rests upon the discretion of the liquidator. However, the buyers should bear in mind that the fundamental duty of a liquidator is to realize the assets for the main benefit of the company. Thus, the terms of sale of assets are usually made to solely sell off the assets of the company, without giving much emphasis on the benefits and protections for the buyers. Principally, a sale of assets between a liquidator and a buyer will be on ‘sold as seen’ or ‘as is when is’ basis. This ultimately means that there would usually will be no warranties or representations given to the buyer in respect of the assets to be sold. The same also applies to the transfer of title of an asset.

For instance, if it later transpires that the title of an asset has not been sold with good title, (for example the goods are subject to a retention of title) the liquidator or the company will not be held responsible for the bad title. Instead, the buyer will have to take full responsibility to resolve the issue so as to avoid loss on its part. Liquidators would generally refuse to provide representations and warranties in respect of the assets to be sold as the ownership of the assets are not vested in the name of the liquidators. Without representations and warranties from the liquidator, the buyer would have no recourse against the liquidator to claim for damages for the loss that the buyer has suffered due to concealment of facts which may have caused the purchaser to have been misled and/or induced into concluding the sale and purchase.

Despite the general practice and proposition that liquidators shall not be required to provide representations and warranties, there is nothing in law which prevents a buyer from requesting for representations or warranties in relation to the assets from a liquidator to such extent as may be applicable to the liquidator and/or on behalf of the company. However, it is important to note that it will only be in extremely rare cases where the liquidators will in fact provide any. Again, the reason for this is that the ultimate goal for the liquidator is to act in the best interest of the creditors of the company, and not the buyer.

Further, the provision of representations and warranties would be far from its scope of duties and responsibilities as the liquidator of a company. It is because of the above that the onus is placed on the buyers to physically conduct necessary inspections and due diligence of any such assets that the buyers wish to purchase. Buyers who wish to purchase assets from liquidators would be advised to ensure that they are able to satisfy themselves specifically as to the title, condition, transferability as well as the condition of the assets.

The buyers should not be too fixated on the price of the assets. Instead, they should really ensure that the assets that they are interested in purchasing will not be more of a burden than it is as an added value to them. To put it simply, the buyers must inspect all the assets that they are interested in buying to make sure that the assets do in fact exist and that they are fit for purpose. Once such necessary steps have taken place, and upon the buyer being satisfied with the condition of the assets, the buyers shall then take all relevant factors into account to negotiate the purchase price of the assets.



As the buyers will not have the right to demand for representations and warranties of any assets that they wish to acquire from liquidators, it is paramount for the buyers to conduct a full due diligence on the assets that they are interested in before making any purchases. As mentioned above, the buyers may request for representations and warranties from the liquidators, however it will only be in exceptional circumstances where the liquidators will agree to provide such terms in the sale and purchase agreement.

It is advisable that a buyer assess all the risks that it may be exposed to when purchasing assets without the provision of representations and warranties from the liquidator before deciding to conclude such sale and purchase. In fact, it is advisable for the buyers to commence due diligence on the assets before the company goes into insolvency so that the buyers will be able to contact the persons in charge of the assets of the company to find out the relevant and necessary information.


Written by:

Syed Zomael Hussain & Fozi Addina Mohamad Fozi (