How can we help if your company is facing insolvency?
As Licensed Insolvency Practitioners, our first objective is to see if we are able to turn around businesses that are struggling financially, avoid insolvency and help them return to profitable trading. If a business is insolvent, but we believe that all or part of it can be saved, or it can be returned to profitable trading then we will recommend a formal company turnaround insolvency procedure such as a Company Administration or a Company Voluntary Arrangement (CVA).
An Administration is used if at least part of an insolvent business can be sold or salvaged, whilst a CVA is used if an insolvent company has the potential to return to profitability. Only if there is no viable alternative will we recommend liquidation.
Company Administration
Administration is a rescue process used if it is considered that there is at least part of the business that can be sold or salvaged as a viable on-going concern. An Administrator is appointed to control the insolvent business and ensure that the proposals put to the creditors are properly carried out.
Administration protects a company whilst a strategy which benefits all stakeholders, especially creditors, is formulated and proposed to creditors. In particular, Administration protects a company from its creditors either by a Court Order or using the out of court process introduced by the Enterprise Act 2002. Nobody can apply to wind up the company during an Administration.
Pre Pack Administration
A Pre Pack Administration is essentially the same thing as an Administration. The only difference between the two is that for a Pre Pack Administration there is already a purchaser for the business and that all the terms of sale have been agreed in advance of the appointment of the administrator. This means that the sale can be completed as soon as the Administrator has been appointed.
Company Voluntary Arrangement
A CVA is an insolvency procedure that allows a company in financial distress that owes money to enter into an arrangement with its creditors to repay its debts, or a percentage of them over an agreed period of time. From the commencement of a CVA, a company can continue to trade even though it is insolvent.
If approached in a proper manner a CVA can give an insolvent business breathing space to take control of its affairs, recover its financial footing and return to successful, profitable trading. A CVA offers a very flexible approach to an insolvent situation and, therefore, can be tailor made to your company’s needs, with a good chance of a company turnaround.
Business advice and turnaround
Struggling businesses that are not yet insolvent are often in what we call the underperformance phase (usually characterised by a lower than expected bank balance, surprising use of an overdraft facility or lower profit margins). Alternatively, they might already be in the distress phase, where the warning signs are much more evident – deteriorating cash flow, increasing debts and declining sales and profits, for example.
If action to achieve a company turnaround isn’t taken at this point, distress can quickly lead to crisis, whereupon the most likely outcome is insolvency and, if recovery procedures, such as Administration or a Company Voluntary Arrangement are not appropriate, then liquidation is the likely outcome.
This is where our company turnaround services come in, including cash flow management and debt advice.
