When a business faces serious financial problems taking prompt action is usually key to saving it.
At Cork Gully we will work with the company, its directors/shareholders and other stakeholders to consider the options available to the company and set out the actions that may be taken.
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.
An Administrator can be appointed without the need for a Court order, making the process simple and cost effective. Administrators can be appointed:
The purposes of an Administration must be as follows:
A rescue of the company as a going concern is often 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 can be 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.
At Cork Gully 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 effected by the Administrator shortly after their 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 a swift sale of the business assets may be necessary, and will often result in the best price being achieved. If the sale was delayed, creditors could ultimately lose out because the price charged for assets will often be reduced after a company enters Administration.
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:
At Cork Gully we can advise on funding strategies and provide introductions to a range of investment sources.