Company bankruptcy question

trudij

Hoping someone can help a friend of mine out...

If someone sold something at auction, the purchaser paid for the item but before the seller was paid the auction house declared bankruptcy, what would happen to the money? He’s not had his money for an item they sold for him before lockdown came along, and he’s panicking that if the auction house declare themselves bankrupt he won’t ever see it or his item again... 

any help would be hugely appreciated!! 

mwarby

The company would be (before the recent changes to wrongful trading due to corona virus) in trouble and they shouldn’t be trading if they can’t pay the owners of goods the money from purchasers

i don’t know about auction houses, but in many cases there are arrangements to separate client money from firm money, the idea being that if insolvency occurs the client money can’t be touched . In this case I think the fees would be company money but the winning bid would be client money 

a bit not picky, but a company (unless they’re a sole trader) wouldn’t go bankrupt, they would go insolvent normally by liquidation(closest to personal bankruptcy), administration, or CVA

TripleH

I assume auction houses would operate a 'client bank account' whereby they have a special account/s where money received on behalf of clients is held (might be wrong). If they do, this should be kept seperate from the money used to run the business and there are quite harsh penalties should a business dip into this client account to fund the general running costs. Again not sure if this is the case however.