Inventor Frank Hornby, who founded Meccano, had a factory in Binns Road, Wavertree, where Doug McHard was an employee and eventually worked his way up to become marketing director.
MECCANO collectors can buy a rare piece of toy history as documents, prototypes and photographs go under the hammer.
When the company folded in the late 1970s, many articles were being destroyed to clear the premises but Mr McHard got permission to remove certain parts of the factory's archive.
He kept them safe until his death and his widow entered the collection to be sold, including memos discussing what to do as the company collapsed.
Valuer David Nathan at Vectis auctioneers on Teeside, who were handling the sale, said: "There are a number of rare or unique lots among the 500, with several that will probably go for thousands of pounds.
"A photograph of Frank Hornby has actually been signed by him and that's the first time I have seen his signature in my years in auctions.
"There are also prototypes of toys, including a tram set, that never went into production.
Estimates of the collection's total worth range from £70,000 to £100,000, but as many of the lots are so unusual valuers cannot be certain how much devoted collectors will be willing to pay.
What started as a cottage industry in 1901, as Christmas presents from father to sons, grew into the largest toy company in the world, also producing Hornby trains and Dinky toys.