Author: Barry Stewart, Personal and Corporate Recovery Specialist and Director at 180 Advisory Solutions Limited (see whole article).
Continued from part 1
Can the company or business recover?
Sometimes (albeit quite rarely) businesses that may be healthy in the long-term and need the protection of administration to allow time for the rescue or restructuring process to be executed.
Following the restructuring, the company exits administration either by the ending the administration or via a Company Voluntary Arrangement.
While only companies can enter administration, it is possible (with a good insolvency practitioner and favourable circumstances) for companies and businesses to be saved under any form of insolvency appointment — even liquidation.
Can parts of the company or business recover?
While the company itself cannot be rescued, parts of its business often can. The other parts — the bits that may have dragged the whole business down — can be closed.
An administrator will quickly assess whether there are any viable parts of a business and seek to keep these trading whilst a buyer is sought for the “good” parts of the business.
Administrators often have more tools at his or her disposal and fewer constrains than the company’s directors, allowing the administrator to better identify and save the good parts of the business.
As I mentioned above, while only companies can enter administration, it is possible (with a good insolvency practitioner and favourable circumstances) for parts of companies and businesses to be saved under any form of insolvency appointment — even liquidation.
If there is a viable business involved and the liquidator is good enough, a liquidation can still result in the rescue of all or part of the business.
Who buys the business or parts of the business?
The administrator’s primary duty is to maximise the amount of money for the creditors. This is the same for all types of insolvency.
How they best achieve this, however, is up to their professional judgement.
When selling a business or its assets, the administrator must be able to prove that the best possible price was achieved. They must be able to prove this regardless of whether the purchaser is an independent third-party or someone who is already involved in the company.
Often a creditor’s initial gut reaction is that it cannot possibly be right that the previous business owner buys the business and/or assets and carries on. Cynically, they think they’ve done a dodgy deal, dumped all the liabilities and gotten away with nothing short of theft!
However, the reality is that previous business owners and directors can often be the ones who offer the highest price and so a sale to them generates the greatest recovery for creditors.
In these cases, the insolvency practitioner will be able to demonstrate that this was the best price. For example, they may compare the accepted price to an independent expert valuer’s report.
To Be Continued…