My Company Is Bust

This is a phrase that we hear everyday. It is uttered by businesses large and small. Every sector of the economy is now encountering problems as access to funding has dried up and the consumer spending boom ratchets back in. People who are afraid of their own debt levels, and employment prospects, decide to spend less on impulse purchases and instead consolidate their finances, by paying down debt or saving.
The effect of this is that sales on the high street suffer. This exacerbates the problem, by meaning that these companies suffer a down turn in profits which results in them having to shed jobs to maintain profitability.
Everyday in the news another High Street chain closes or files for administration. Each one of these takes its supplies from British companies who either manufacture themselves or import from abroad.
From textiles to estate agencies, from mobility scooters to dyers, everybody is having to tighten their belts.
For many there is nothing left to tighten. For others the time they have to react is just too short.
However for everybody there may be a solution. As with all things insolvent, timely intervention is the key. The earlier a solution is explored the better chance it has of being successful.
There are a range of solutions which include non insolvency turnaround, through dividend returning CVA’s and Administrations to pre-pack sale administrations and liquidation to the straight forward liquidated closure.
The fact that the limited company shell may have to close does not mean that a business dies. If you have a company that is bust, you need to take professional advice and take steps to minimise losses to your creditors. Failure to do so may cause problems for you in due course if you cause additional loses. This may result on personal liability for the directors as a result of wrongful trading.

Why an Administration might be right for your business

The company administration is now an extremely popular method for a company to deal with its financial problems. In the last quarter of 2008, some 2000 companies took advice and opted for the administration solution.

When an administration is proposed, it is generally with the intention of saving the whole or part of the company as a going concern, proposing a CVA or achieving a better realisation than might be achieved if the company does not enter into an administration.

If the company has a trading business that would be affected by any cessation in trade, then an admin must be considered. Any closure of stores, or for instance a public house, may lead to loss of confidence, and a resulting loss of trade.

If the company is a people business and relies on its staff, then it will want to protect those staff and the relationships they have. A liquidation may cause a people business to lose staff, and contracts before a rescue package can be put in place.

It would also work for a business that deals with perishable items and this can be combined with a centre-bind which would help the administrator sell these items before they spoiled.

The proposed administrator will prepare his proposal, and present it to court. If the court thinks that there is merit in the proposal, time will be given to see those plans through to fruition. The administrator will then have three months to complete matters before the order expires. He may apply for more time if required, but he must show a reasonable chance of success.

In the vast majority of cases a proposed administrator will have an exit route in mind and move very quickly to put that in place, before those deals expire.

If you have a business that is in trouble, but you think that it can be saved. You need to call an insolvency practitioner now, so they have the best chance of getting maximum value from what is left.

Partnership Administration

Partnership Administration

A Partnership Administration Order is similar in some ways to Administration for a limited company. It is a rescue vehicle often used by larger partnerships such as accountants, solicitors and architects. Many of these are now trading as limited liability companies, but many partnerships do still exist. For those running out of cash it is certainly something to consider.
All of the partners must be solvent. Effectively the partnership administration is to protect the partnership whilst a restructuring, refinancing or sale is considered.
The process is begun by preparing a statement of affairs which will show the true position of the partnership. The partners can then apply to court, and we would assist in this process as it can be daunting. An administrator will be nominated and again we will assist with this as that person needs to be suitably licensed for this type of work. It is usual for an interim order to be granted to prevent creditors taking any action against the partnership whilst the court consider matters.

At the hearing the court considers the application and whether it should allow the court to grant powers to the administrator to run the partnership affairs. The court may then grant the order which gives full protection to the partnership – a full moratorium providing all conditions are met and the rules observed.
The admin order is granted only when the one of three options is being pursued.
1. The proposal of a partnership voluntary arrangement
2. Survival of all or part of the business as a going concern
3. A more orderly realisation of assets than may happen in winding up (In other words avoidance of the meltdown of assets inevitable in liquidation.
The IP will over the next three months put his plans into operation for achieving one or more of the above three options
The benefits of Administration are
1. Protection of the partnership business from creditors

2. The IP has breathing space in which to develop and put in place the rescue plan.
3. It stops on creditor from exerting more influence on matters than others.
4. It generally leads to a better return for all creditors.
5. In the event that one or more partners is also suffering financially, it prevents an attack on partnership assets by a rapacious creditor.
The risks or downsides are:
1. It is necessarily costly, but maybe not as costly as the whole partnership failing.

2. The business world will know of the administration as all communications will record that fact.
3. There must be sufficient cash available for the partnership to trade through the administration process, however a good plan will factor this into the equation.

4. The individual partners may also depending on their personal financial situation, need to do simultaneous IVA’s

If you are in a Partnership that is struggling at present you should take urgent initial advice to see what can be done to ease your way through the financial difficulties you are in.

The Pre-Pack Liquidation

While I've got a bit of time on my hands I thought I'd post up another few pages of advice that I've written about the company rescue regime in the UK. At these times many companies are struggling, often because their own customers are having a rough time. For many, it is the Limited company shell which is in trouble, as it may carry debt and not the actual underlying business itself. For these businesses the answer may be a prepack liquidation, whereby the business can be saved along with jobs but the debt can be hived off in the insolvent Limited company shell.

Contact me for more information

Prepack liquidation

A pre-pack liquidation is a favoured way for a company that is in financial difficulties, to properly and correctly close the loss making entity, so as to protect the directors from accusations of wrongful trading, but to enable the business and the employees to be transferred to a debt free company.
It is the view of government that it is better to preserve the business and let the legal entity fail, than let a potentially profitable business founder.
We have the expertise to help you set up a new company and with the blessing of the proposed liquidator of the insolvent company, conduct a sale for value of the on-going trading element of the insolvent business to new co and then close the insolvent company at a creditors meeting.
There has been comment recently that there are too many pre-packs happening now. However, with increasing failures of companies, this is to be expected. A lot of businesses that are experiencing financial difficulties, are on an underlying basis, sound trading companies. If you take away their debt, they will flourish and continue to employ staff and generate sales. It is vitally important in today’s economic climate, to keep people with skills in employment, and to get companies trading with each other.
We can help pre-pack such businesses so that they can continue to build on the wealth of the country.
If you would like to pre-pack your insolvent company and re-trade in a debt free new co, please call us for an informal conversation, on how we can assist, and the likely timescales.