Bankrupt stock: how to sell it, and who buys it

"Bankrupt stock" gets used for any inventory left behind when a business fails. That's how people search for it, so it's how we've titled this page. But the legal process behind it, and who you deal with, depends on whether the owner is a person or a company. Get that right first and the rest is much simpler.

This is general information, not advice. If you're the owner, talk to your accountant and a registered trustee or liquidator before you sell anything.

What is bankrupt stock?

Bankrupt stock is the inventory of a person or business that can't pay its debts, which has to be sold to repay creditors.

It can be anything a business held: finished goods, raw materials, packaging, stock on order, even empty bottles. Some of it is perfectly saleable. Some has a problem that has to be disclosed. Almost all of it is worth something to someone.

Personal bankruptcy vs company insolvency: who sells the stock?

For an individual or sole trader, a registered bankruptcy trustee deals with the assets. For a company, a registered liquidator does. They're regulated by different bodies.

AFSA's page on personal bankruptcy and company liquidation explains a point that catches many owners out. A sole trader's business isn't separate from them, so they're personally liable for its debts. A company is separate, but a company liquidation doesn't wipe out personal guarantees a director has given.

For companies, ASIC's liquidation guide for creditors says the liquidator secures, recovers and sells the company's property, and that directors can't use their powers once a liquidator is appointed. Our company liquidation guide covers the company side in more detail.

Who buys bankrupt stock?

Bankrupt stock buyers are businesses that buy whole parcels and resell them through their own networks. We're one of them.

We sell to major retailers, discount chains, overseas buyers, charities, wholesalers and distributors. Each has different motivations. A discount chain wants volume at the right price. An overseas buyer may take a line that can't easily be sold here. A charity may suit stock that's fine to use but hard to retail. Matching the parcel to the buyer is most of the job, and it's why one buyer for the whole parcel often beats selling it off piece by piece.

More on the buyer side in who buys excess stock in Australia.

How do trustees and liquidators usually sell stock?

They want a fair price, a clean process and as little holding cost as possible. The common options:

There's no single right answer, and it's common to use more than one. We're often the first call for the bulk of the inventory because we can make one offer for all of it.

How to get the best price for bankrupt stock

The value of bankrupt stock usually falls with time, so organisation and speed matter more than anything else.

1. Move early

Stock rarely gets more valuable while it waits. Food approaches its best-before date, seasons pass, rent keeps running. If you're the trustee or liquidator, getting the stock list out early protects the return. If you're the owner and still in control, get advice early so you know what you're allowed to do.

2. Take a proper inventory

A stock list spreadsheet with SKU, description, quantity, best-before dates, and cost or RRP if you're happy to share it. Don't forget stock on order or in transit, which may add value if it can be included.

3. Be upfront about problems

Damaged cartons, wrong labels, short dates, missing parts. Buyers find out eventually. Disclosing it up front means the offer you get is one that holds, and we can often still find a buyer who's fine with it.

4. Don't write anything off too quickly

Some of our most interesting deals started as stock others thought was worthless. We once bought a discontinued line of glass bottles, had them filled with soft drink by a beverage company with spare capacity, and sold the finished product to a discount retailer. Lateral thinking is part of the job.

5. Deal with someone who'll put an offer in writing

Ask how they arrived at the price, how payment works and where the stock will go. A genuine buyer will answer plainly.

What makes bankrupt stock harder to sell?

Buyers know the seller won't be around later, and they price that in.

With a healthy supplier, a buyer can ring up about a faulty unit, a missing carton or a warranty claim. With an insolvent one, there's nobody to call. So bankrupt stock buyers think about:

• Warranty and after-sales support. Electrical goods, appliances and anything with parts are the most affected.
• Completeness. Are there missing components, manuals or chargers? Is the count accurate?
• Dates. Food, cosmetics, personal care and chemicals with short or passed dates need careful handling and the right buyer.
• Brand restrictions. Licensed and branded goods may come with conditions from the brand owner about where they can be sold.
• Access and timing. Stock in premises that are about to be handed back needs to be collected quickly.

You can't remove these concerns, but you can reduce them. A tested sample, an accurate count, clear photos of labels and dates, and honest notes about problems all make a parcel easier to place. Where something genuinely is wrong, we tell our buyers, because it's the only way to keep them coming back.

What does bankrupt stock look like in practice?

It's every kind of product. Over the years we've bought and sold food, general merchandise, licensed products, personal care, clothing, toys, shoes, electrical products, cleaning products, cosmetics, batteries and much more. A few real parcels that came out of business failures: licensed children's products from a company liquidation and 400,000 digital photo prints.

The common thread isn't the product. It's that each parcel needed the right buyer, found quickly, and a seller who gave us good information.

A note for owners who are still trading

If you can see trouble coming but no trustee or liquidator has been appointed, you may still be in control of your stock. That's when you have the most choice about how it's sold. It's also when you need to be most careful.

Selling surplus stock at a fair price can ease cash flow. Selling it cheaply to a friend, or paying one creditor ahead of others, can be unwound later and may create personal problems. The rules differ for individuals and companies and depend on your circumstances. Before any significant sale, talk to your accountant, and to a registered trustee or liquidator if insolvency is a real possibility. If they're comfortable with a sale at market value, we can give you a written offer that shows exactly what was paid.

What happens when you send us bankrupt stock?

We buy the parcel ourselves and resell it. There's no fee to the seller.

1. You send the details: the spreadsheet, photos, quantities, dates and location.
2. John Coorey surveys the market discreetly to find out what the stock is worth.
3. In most cases, he makes an offer for all of it. If buying the whole parcel isn't possible, he gives his best advice on how to sell it.

Collection is flexible and agreed per parcel. We buy from anywhere in Australia, from New Zealand and internationally, and there's no minimum size.

Our four guarantees:

1. "We strictly follow your guidelines in relation to pricing and distribution locations."
2. "We send payment promptly, as per our agreed terms."
3. "We place a priority focus on clearing your stock."
4. "We speedily and discreetly convert your stock into cash at the highest possible price, without damaging your market position."

We work closely with insolvency practitioners and like doing more of it. See how we work with administrators and liquidators, or if you're closing a business yourself, our page on closing-down business stock.

Whatever the structure, the people involved usually want the same things: a fair price, a clean paper trail, prompt payment and the stock gone. A single buyer for the whole parcel delivers most of that in one step, which is why trustees and liquidators often start there.

The short version

• Work out whether it's a bankruptcy (trustee, AFSA) or a company insolvency (liquidator, ASIC). That tells you who can sell.
• Get advice before selling anything if you're the owner.
• Prepare a clean stock list and be honest about problems.
• Move early, because value falls while stock waits.
• Get one offer for the whole parcel and compare it with the alternatives.

Call John on 0411 430 047, email john@coorey.com, or send us your stock details.