Not all businesses will be successful and unfortunately some businesses may face financial distress. Addressing problems early with the right advisers can significantly increase the chances of recovery through to more prosperous times. Directors also need to be aware of their duties and responsibilities in these circumstances and understand the higher risk of personal liability.
The restructuring environment has become significantly more sophisticated in recent years and a varied toolkit of techniques and solutions is now available.
We regularly act for banks, insolvency practitioners, creditors and asset based lenders on a wide range of business recovery and insolvency issues.
We have extensive experience in the field of distressed transactions and act for a number of investors who are active in this market as well as trade buyers and insolvency practitioners. Sometimes transactions will occur on a solvent basis without the need for any insolvency process and in other cases a transaction following an insolvency process may be the only viable option. A transaction may be negotiated prior to an insolvency process with the transaction occurring immediately following the insolvency appointment. This is known as a pre-pack transaction. Time is often of the essence in distressed transactions and an innovative structure may give a potential buyer a competitive advantage in negotiations with an insolvency practitioner. Distressed transactions take a different form to solvent transactions with a buyer typically receiving no warranty protection. The higher risk of these transactions is reflected in price and buyers need to be aware of their liabilities to employees in relation to the transfer of undertakings and there are frequently property complexities to address.
Re-use of company names and prohibited names
Care needs to be taken in the re-use of company names where a company has gone into insolvent liquidation as directors risk may face criminal prosecution and personal liability for re-use of a prohibited name. We are able to provide guidance in this area.
Occasionally a client may have a debtor who is struggling to meet its obligations to creditors. We may be required to advise a client upon the merits of its support for some type of process such as a company voluntary arrangement or to put in place some form of bespoke arrangement, for example where our client is a critical supplier and is looking to mitigate its risk associated with continuity of supply.
Company restructuring and reorganisations
If action is taken sufficiently early, a solvent company restructure or reorganisation [link] may provide a viable solution to a distressed situation such as a debt for equity swap.
Transactions at an undervalue and preferences
Certain transactions entered into by companies may be liable to be set aside in the event of insolvency if those transactions are at an undervalue or represent a preference. This carries risk not only for the company concerned but also any counterparty to those transactions. We can help identify these risks and mitigate against them.