Acquisitions and Disposals Pre -Insolvency (“accelerated disposals”)
Pre-Pack Administration | Liquidation and Phoenix Companies.
The Enterprise Act of 2002 and the Limited Liability Partnerships Act 2000 (and subsequent Regulations) simplified the procedure for placing companies and LLP’s into administration to facilitate corporate and company rescue and improving the outcome for creditors.
To maximise value where a turnaround is not possible there still remains the ability for management to dispose of the shares or business and it’s assets to a trade buyer | to a newly established vehicle by management (“a Management Buy Out“) or existing parent companies prior to a formal insolvency as long as certain conditions are met (the “Accelerated Disposal Process“). This process can keep management in control and maximise stakeholder value. In many circumstances this valuable option to management is never explored.
There has also arisen the much maligned process of the pre packaged administration where the disposal of the business and assets of the company or LLP in crisis is agreed prior to a formal insolvency process (administration | liquidation) and thereafter a disposal by an insolvency practitioner takes place often to the existing management through a new company set up by the existing management (“the phoenix vehicle | company”)
This method (“pre-pack administration or liquidation”) provides the opportunity for a new company owned by the existing management (the “phoenix company”) to purchase the business | assets of the insolvent company on the appointment of an insolvency practitioner.
There are a number of legal | commercial factors that will determine which process is the most suitable for your company or LLP which are too varied to describe in detail and each business is fundamentally different and in a different level of distress and | or crisis thus different factors will come into play.
Some examples are: there is a ongoing business that is capable of survival | winding up petition/s are threatened and/or been issued | bailiffs are threatening walking possession | the support of lenders has been lost | cash is almost exhausted | assets are illiquid | landlords are threatening distraint | shareholding may be held amongst a number of individuals | time is critical | key contracts, customers are lost | certain employees are not needed.
There are also a number of factors which will determine whether existing management will secure the business and assets, securing finance usually being the most important.
We can assist you in devising the strategy | your offer | sourcing finance to fund an acquisition and ongoing working capital requirements | structure and negotiate the acquisition whether through a pre sale | pre pack or out of an administration or liquidation and maximise your prospects of securing the business and assets and minimising the disadvantages and disruption to the core business (particularly to key staff and customers) and your personal exposure. We will negotiate preferential positions with amongst others landlords and finance creditors and minimise | eliminate your exposure under personal guarantees and claims that can be brought against directors. Throughout your interests will be protected.
We have a track record of achieving results which ultimately benefit you | the creditors (both secured and unsecured) | employees and customers and give your new business the best prospects of survival and ultimately success.
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The Venture Consulting Team