When we meet directors of companies under severe financial pressure, we ask the following key questions:
Question 1: Is it possible to rescue the company?
Can the company and its business remain intact and continue to trade as a going concern? Typically, this can be achieved via:
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Operational restructuring
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Refinancing
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Negotiation with creditors, in some cases involving implementation of a Company Voluntary Arrangement or a period of Administration while the business is stabilised
Question 2: If it’s not possible to rescue the company, can we rescue its business, either partially or wholly, via its sale as a going concern and free from its historic debt burden?
This transaction is usually completed by an insolvency practitioner dealing with the company in administration and is subject to an independent valuation to ensure good value is achieved. Benefits include job protection and a premium achieved for the sale of the company’s total business and assets as a going concern, compared to a break-up sale of assets in a liquidation scenario. Associated parties, including directors, can buy the company’s business and assets if their offer represents good value both to the company and its creditors. This transaction must be fully disclosed.
Question 3: If neither is possible, how can we best minimise the emotional and practical impact of the situation on the company’s stakeholders, allowing everyone to move forward?
In some cases, a company’s financial position is so severe that there is a limited prospect of either a recovery of the company or sale of its business as a going concern. By continuing to trade, the directors could worsen the position for the company and its creditors. In this case, directors take steps to place the company into Creditors’ Voluntary Liquidation (CVL) with our assistance.
Involving a cessation of trading, a CVL allows directors to confirm to creditors the events leading to liquidation and their efforts to protect creditors’ interests. Directors are also able to acquire the company’s assets and goodwill from a liquidator on a break-up basis should they wish to restart in some form.
Finally, we look at the directors’ financial means, the support from those around them, and what they hope to achieve. This gives us an in-depth understanding of their situation. When more than one option is available, the directors’ attitude may well be key to the solution we recommend.
We consider all these factors when recommending a strategy based on the best solution in the circumstances. When doing this, we are constantly aware of the people involved, being mindful of the emotions they may be experiencing during what can be a very stressful time. In our experience, a combination of clear direction and support is critical in implementing successful solutions.
During initial consultations, we gather extensive information regarding the company. This helps us to identify the best solution for the company. See our checklist of the information below.
