Cork Gully is able to advise on the options available to a business facing serious financial problems. Taking action promptly is usually key to saving a business. We can work with the company and its directors/shareholders or advise secured and other creditors of the actions they may take.
In an administration, the company and its assets are placed under the control of an Administrator and the protection of the Court. The appointment brings a moratorium into immediate effect which prevents creditors taking action against the company without the agreement of the Administrator or an order of the Court. This ‘breathing space’ allows the Administrator and the directors to take stock of the company’s position and formulate a strategy for the way forward.
Following the Enterprise Act 2002, it is now possible to appoint an Administrator without the need for a Court order, making the process simpler and more cost effective. Administrators can be appointed:
The purposes for which an Administration may be sought are as follows:
An Administrator must firstly look to rescue the company as a going concern. This can often be achieved via a restructuring of the business and an exit from administration through a company voluntary arrangement, with the business being returned to management.
Where a rescue of the company itself cannot be achieved the Administrator’s efforts would be directed towards maximising the return to creditors from a sale of the business and its assets as a going concern in whole or in part. This could take the form of a pre-packaged sale where it is shown that this would be advantageous to creditors. During the marketing campaign the business may continue to trade if there are sufficient funds to cover operations or it may be closed.
An Administrator acts as an agent of the company and can continue to trade all or part of a business. Trading must be in the best interests of creditors, so the Administrator must be comfortable that either:
Trading during administration ensures continuity of services/supplies to customers and can therefore preserve the value of goodwill and the customer base.
If funds are not available to trade the business, it will be necessary to shut down whilst a rapid and intensive marketing campaign is carried out.
We will use our extensive network of contacts when offering the business for sale and will seek formal offers from credit-worthy sources with the objective of obtaining the best possible value for the creditors. We will offer the business for sale in the UK, Europe and the rest of the world if applicable.
A pre-packaged sale (“pre-pack”) refers to an arrangement under which the sale of all or part of a company’s business or assets is negotiated with a purchaser prior to the appointment of an Administrator. The sale will be affected by the Administrator shortly after his/her appointment.
The process can be seen as controversial because the creditors do not have the opportunity to vote against the proposed asset sale. The rationale behind the process is that the swift sale of the business assets may be necessary or of benefit to enable a best price to be achieved. If the sale was delayed, creditors would ultimately lose out because the price charged for the assets would be reduced.
An Administrator must show to creditors that a fair price has been paid for the assets/business and explain why it was not possible to trade the business which would have allowed an open and transparent sales process.
Advantages of pre-packs are:
We can advise on funding strategies and provide introductions to a range of investment sources.