Saving Businesses with Pre-packed Administration

pre-pack-administration1A pre-packed administration is a procedure that allows an insolvent but viable business to be sold partly or as a whole to a trade buyer or to one of its existing directors where the old company shall cease to exist while its assets and operations shall be transferred to a new company.

This method is a powerful and legal means to save businesses that are struggling in the finance department. It’s most celebrated benefit would have to be that regarding continuity. The pre-pack administration further strengthens the entity’s going concern and keeps liquidation at bay as it protects the company from any further threats. However, it is to be remembered that all this are only feasible if the pre-pack is carried out before a winding up petition arises.

The method also aids in ensuring that there are minimal if not an absence of operational hiccups. Delays, obstructions and hindrances are avoided at best because the transition allows for a flow instead of a cut which will happen should liquidation comes to play instead. The continuity also allows the entity to bounce back and regain its ground instead of fall through the cracks.

Furthermore, a pre-pack is also considered to be a restructuring procedure. The change in management allows for improvements, upgrades and assessments to be done. A struggling entity has problems and sometimes it takes a different perspective to finally solve it. The changes of course come after careful planning and examination.

The business is likely to be set free from certain debts particularly unsecured ones as well as unwanted or onerous contracts. Although redundant positions may be scraped out if present, a pre-pack still saves employment. Personnel are likely to keep their jobs as opposed to a deliberate and outright liquidation where no one is spared.

The economy in some way also benefits from the procedure. A business going under can hurt the economy becomes it means hundreds or thousands of lost jobs. A company’s demise will also affect other entities because their goods and/or services are likely to be used by another organization. It’s like a domino effect. Even if the struggling entity is under new ownership, the benefits it creates are still magnanimous.

We can therefore conclude that a pre-pack administration procedure can definitely save businesses. So if you happen to find yourself under some trouble, this is an option that is well worth considering.

Members Voluntary Liquidation and Why It’s Necessary

members-voluntary-liquidation-UKThere are cases when even a solvent company validly decides to cease trading and wind up its affairs. In such instances a Members Voluntary Liquidation will be called for.

Now an MVL, short for Members Voluntary Liquidation, is nothing new anymore. As a matter of fact it has been around for quite some time already and has been used by a number of companies all over the world.

Defined, an MVL is a procedure taken by a solvent company that puts it in liquidation. Its assets are to be sold with the proceeds redistributed to all stakeholders with priority given to creditors. In order for it to take its place, the board of directors must first congregate with the majority favoring the winding up process. It is after this where a board resolution shall be passed. Moreover, the company has to prove that it is indeed financially stable and capable of fulfilling its obligations to its creditors as they mature within a twelve month period.

So why will a solvent, fully operational and financially stable entity want to close its doors and cease trading? There are valid reasons to it as mentioned earlier and below are some of them.

First of all, each and every organization or entity is put up for a cause, a reason or a purpose. Once that has been completed and attained in full, the entity may find it necessary to wind up. This is quite common in many not for profit organizations and those that are only intended to live up to a certain time frame.

There too is the family owned and run companies. In cases where no heir or successor steps up, the board may find it viable to liquidate and redistribute its assets back into the owner’s pockets where they may be used for personal reasons or reinvested back in other ventures.

Third, the loss of a key member to the company and an impending risk also make the MVL viable. The death, retirement or resignation of a key member can pose huge risks and possible losses to the company. To avoid it, liquidation may be done. This is particularly applicable to companies that are heavily dependent on the expertise of a specific person or groups of experts.

Lastly, retirement is one of the most common reasons for a Members Voluntary Liquidation. After all the years of hard work, owners may want to get their investments back and spend it leisurely after all those years of working from nine to five if not more.

You can read more no MVL here

AABRS Shares the Common Business Downfalls and Mistakes

business downfallWhen it comes to mishaps, businesses are not exempted. There have been numerous ruins in the course of business history that were either shocking or expected. It can happen to anyone from the smallest to the biggest companies, from the newly created to the long established ones. But what could possibly ruin a good entrepreneurial venture? AABRS has come up with a list of the most common downfalls and mistakes that any entrepreneur could make which will ruin their hard work and investments. Take heed and be sure you don’t fall into the pit.

  • A Poor Accounting System and Procedures

Without proper recording, your financial reports will be misleading thus causing inappropriate and bad decisions to be made. At the same time, this can encourage fraud and theft within the organization. When the figures are wrong, you should downright be scared. Act fast and fix it.

  • An Unqualified Finance Team

What could cause the presence of poor accounting, misleading reports, ineffective budgets and any other financial dilemma could be the presence of the wrong team. People and talents are what make any company strive. Make sure that you invest in the right ones.

  • Loose or Unfit Standard Operating Procedures

Absence of procedures or even loosely implemented SOPs can be fatal. Yes, the effect may creep in slowly but over time, the accumulation of effects can hit you pretty hard. Keep them in check and always strive for improvement where needed. Don’t settle for okay. Always go for gold.

  • Mindlessly Signing Contracts

Never sign into any contract if you do not fully understand every word in it. This pertains to every piece of document handed to you may it be as simple as signing the usual checks for vendor payment, loan applications or sale and purchase of fixed assets. You do not want to be bound in something that you have not fully agreed to.

  • Banking Too Much on Credit

It’s okay to borrow or loan but that should be on valid grounds. Moreover, do not cross the point where you become debt heavy that is having your liabilities amount more than your assets. You need to be both solvent and liquid.

  • Risking Everything on One Person

Last on this list, AABRS warns companies who risk too much on one person. One of the reasons that can put any entity into liquidation is the loss of a significant member to the organization whose absence brings peril and financial consequences to the company. Such loss does not only mean death but also retirement and resignation.

The Red Flags of a Restaurant on the Brink of Bankruptcy

bankruptcy flagsMany of the biggest entities of today pertain to those that delve into the food industry. Think about it. How many bakeshops, patisseries, cafes and restaurants have sprung up in your area? We bet there’s a lot. You may have even noticed that a lot of them come and go and only a few are left standing mightily. That is because even with the food industry’s high demands and great market interests, not all of them can survive with the times. Do you want to know how to spot a restaurant that is on the brink of bankruptcy? If you are an owner, employee, supplier, business partner or a loyal customer, you might be interested on this list by

Red Flag No. 1: Late or long outstanding payables – Missed payments for orders and other credit obligations are a huge tell tale sign that the restaurant is having trouble with its finances. Human error is rarely the case especially if it happens repeatedly. After all, no entrepreneur would want to miss payments due to the penalties that come with it.

Red Flag No. 2: Unpaid employee wages – operational expenses may also be unpaid such as employee salary and wages. This is also bad for the business as it can lose its team of talented crew and staff.

Red Flag No. 3: Increasing levels of interests – With unpaid credit and unmet obligations, comes a higher level of interest expense. Check your financial statements.

Red Flag No. 4: People packing bags – If you notice that employee turnover has become frequent and people are turning in their resignations, it could also be a sign that the restaurant isn’t doing well anymore or stable enough to hold jobs.

Red Flag No. 5: Customer bail outs – A decline in customers is something that no entrepreneur wants. Should there be a download slope, you have to get to the bottom of things because eventually, such can cause business demise.

Red Flag No. 6: Big ticket sales – When the restaurant starts selling off and disposing big ticket items, it can also mean financial stress but of course not all the time. Sometimes, entities do have to sell but should it happen abruptly or due to an unpaid debt, it is an obvious warning flag.

Red Flag No. 7: Abrupt cost cutting – Another red flag to restaurant bankruptcy according to is the sudden and huge cuts on the budget. This is oftentimes seen as a reduction in amenities and employee benefits.

What Does a Winding Up Petition Signify?

A winding up petition or a forced liquidation is implemented to insolvent entities after company creditors have appealed to court. It happens to many businesses, old and new, small and established, name it. In such case the court forces the business to liquidate all of its assets thereby calling for a cease in trade and operations. The proceeds of such sale are then to be distributed to the creditors and if there is any remaining to shareholders. When your company receives a winding up petition it clearly signifies a lot of things. Listed below are some of them. Remember though that not all of the following may be applicable to your case because after all this depends on the situation at hand.

winding up petition london # 1: FAILURE TO PAY DEBTS ON TIME – For one it signifies that the entity has been consistently missing on payments of its debts. Remember that a winding up petition is brought about by creditors and there is completely no reason for them to waste their energy on raising their petition to court unless they have been consistently delayed in receiving the amounts due them.

# 2: EXHAUSTION OF OTHER OPTIONS FOR CREDITORS – Additionally, it is important to take note that a winding up petition is brought up by the creditors themselves meaning that they have dished out their own resources. Such is only done when they have exhausted all other available options and are positive about a good return.

# 3: LACK OF LIQUID ASSETS – This also entails that the business does not anymore have enough liquid assets to provide for its regular operational expenses as well as its liabilities. Cash could be dwindling.

# 4: CORPORATE INSOLVENCY – Another obvious one would be insolvency. Of course companies given with a winding up petition can still appeal to court but their inability to meet their obligations could signal that they are insolvent or at least imply that they might be heading there.

# 5: FAILURE TO ANTICIPATE THE PROBLEM – Lastly, a winding up petition can signify the entity’s inability to anticipate its expenses and income as well as its possible problems and road bumps. There will be times when business is not doing well or losses could even be present; however, businesses should strive to look for ways to solve the problem at the onset. Do not let it bloat up and leave your creditors hanging because they can force you to pack your bags and liquidate.


Business Recovery Options for Insolvent Companies

A company is called insolvent when it has reached a stage wherein it can no longer fulfill its debts as they mature. Here, the business liabilities over exceed its assets and its cash outflows tower over its cash inflows. This is brought about by several factors both internal and external to the entity such as but not limited to decline in economy, change in customer preferences, drastic decline in sales and mismanagement of corporate assets. Such can be inferred after a meticulous study and examination of the company’s books and operations. There are several business recovery options for insolvent companies. Let’s discuss some of them here.

THE ADMINISTRATION – Here, an insolvency practitioner will be tasked to control the business. This is a re-organization or re-structuring procedure that formulate for the rescue of the business, maximizes asset realization and seeks to find other options for a turnaround.

business recoveryTHE PRE-PACK – Also a restructuring type of business recovery option, the pre-pack is the sale of the entire company or part of it as it seeks to run the business under new management and additionally acquire cash to pay for its debts. This method strengthens the going concern for the organization and allows it to continue operations. In essence, this method does not cease or halt trade.

THE VOLUNTARY ARRANGEMENT – In this option, the business formally agrees with its creditors to allow it to trade in order to provide fund to repay its debt at an agreed interest rate and for a period of as long as five years. It will require at least a seventy five percentage of vote from the creditors for such agreement to be valid and binding.

THE VOLUNTARY LIQUIDATION – More commonly referred to as a CVL which stands for a creditors’ voluntary liquidation, this method puts the business to a formal close where it sells all of its assets and distributes its proceeds to the corporate creditors and to fulfill any other remaining obligations for example to its employees. The distribution to the creditors is allocated in proportion so there is a possibility for them to be not paid in full. Should that happen, a CVL will legally pardon any unpaid debts after distribution.

When it comes to business recovery options, it is essential for companies and business owners to carefully weigh down which option benefits them the most. Insolvency is a serious matter and a lack of action might bring up a winding up petition which nobody wants.

The Consequences of a Forced or Compulsory Liquidation and Winding up Petitions

What is a forced or compulsory liquidation and winding up petitions? It really sounds bad but is it really? Take a look and get to know how such can affect your company, its consequences and what you can do to avoid one.

A forced or compulsory liquidation can be brought about by a winding up petition brought upon by the corporate creditors. This happens when the said creditors have exhausted all other means to collect payment which is due from the company. This can mean late payments, contract beaches, bounced checks and the like. Since this process can be costly to the corporate creditors, it is mostly only done where one, they can recover a considerable amount that outweighs the costs and two they have tried all other options to enforce collection.

business recovery optionsSuch petition is brought up to court who in turn releases an order to force the company to liquidate all its assets and distribute its proceeds to its creditors. What other consequences or effect does it bring the company aside from the obvious cessation of business?

CONSEQUENCE # 1: It strips the directors of power and control over assets. The company does not even get to choose the liquidator. The court or the creditors do. Any sale of assets will be reverted and invalidated.

CONSEQUENCE # 2: It can extend directors’ liability up to their personal assets if proven that they have failed to do their responsibility of putting creditor interest above their own gains.

CONSEQUENCE # 3: It tarnishes the brand image. It puts the company at critical public scrutiny and gives it a bad reputation as someone who does not pay off their dues.

CONSEQUENCE # 4: Bank accounts will be frozen. This is to prevent the company from undertaking transactions that can worsen its state and from allegedly escaping their liabilities. Should the court allow continued operations, these are to be undertaken only so as to aid in the winding up of the business and will be heavily monitored.

So what can one do? If the company has already concluded its state of insolvency then it has to file a CVL which is a voluntary liquidation for insolvent entities. This is better than to wait out for a winding up petition or compulsory liquidation and suffer the consequences. At times, bowing out gracefully is the best solution. But in other cases, some business recovery options can work to such as restructuring and mergers and acquisitions to name a few.

What Cases Call for a Members’ Voluntary Liquidation?

You many have already heard about liquidations and know its kinds the voluntary ones (creditors’ voluntary liquidation and members’ voluntary liquidation) and the compulsory one (winding up petition). Liquidations happen when the company needs to close down and ceases its operations. Today, we will get to know the second type of voluntary liquidation called the MVL.

The MVL which stands for the Members’ Voluntary Liquidation is one that is undertaken by a solvent company. A business is only called solvent when such can perpetually meet its present and maturing debts and obligations. In simpler words, it is still capable of operations with assets that will suffice to keep it operating and to pay for its liabilities.

With the above said, it is illegal and not allowed for an insolvent entity to file for an MVL; however, the CVL (creditors’ voluntary liquidations) should be their option. To ensure that financially distressed companies do not mistakenly or worse fraudulently declare their financial status, a state of corporate solvency has to be submitted and proved.

members voluntary liquidationBut then again why would an otherwise operational company want to close down? Here are some of the more popular cases that can bring about an MVL:

  1. There are incidents where the sudden death, resignation or retirement of a significant and very vital member of the organization can lead the directors to decide that the business’ assets are better liquidated and distributed accordingly. This is often the case in many highly technical and computer or digital entities.
  2. Believe it or not, there are family run businesses where no successor would want to step up. This could be because the owners want to retire or the other family members want to pursue their other personal professions or maybe venture into a different kind of business.
  3. Another case is where the purpose of the business ceases to exist. Organizations or companies are set up for a certain reason as contained in the corporate vision and mission. When its purpose has expired so does its life but that does not mean that the business is already incapable of meeting tis obligations. It is possible that they can still run the business given the state of its affairs but when you look at the flip side of the coin, why continue an endeavor without a purpose?

A Members’ Voluntary Liquidation is one way of doing things but there too are other options available. Ask and consult your advisor.


AABRS on Business Recovery Options and How They Work

Going into business has its own risks according to the experts at AABRS. Besides, putting up a company is in itself an investment. Undergoing through such entails that one knows the possible consequences may they be good or bad. With that said, some of the unwanted risks inborn to each and every company are the risks of bankruptcy, insolvency and losses to name three.

aabrs prepack administrationAlthough it is also quite true that a downward slope in your sales does not immediately signal that you’d be closing down in a few weeks time. Many companies undergo such a point somewhere in their business cycle. Such are inevitable. In fact, many of the well established companies today have almost not made it. Take Google and Apple for example. Before the sudden boom of their products and markets, they almost sold their companies and have experienced downturns that looked so bad continuing looked like a tremendous and stupid feat. But they picked themselves up and here they are.

But what are the tell-tale signs for you to take heed and start looking at business recovery options? Below is a list of three of these situations:

  1. You have failed to fulfill your financial obligations, late or missed vendor payments and a ballooning number of debts that have piled up at a hard to manage depth.
  2. There is a big shift in customer preferences that has affected sales and operations at a major level.
  3. The company has swayed from its mission, vision and objectives that the company has initially set at its birth and as signed by the founders or incorporators.

There are many business recovery options out there and here are a few of them for you to get to know of:

  1. Restructuring or the Pre-pack Administration is a very popular business recovery option. It seeks to sell the business as a whole or only a portion of it to a third party or even to one of the existing directors who wishes to do the purchase. It is restructuring in the sense that the entity operates under a new management giving it time to potentially recover and be able to bounce back.
  2. Turnaround Services is another approach wherein a team of professionals steps in to work in collaboration with the troubled entity and be able to device the perfect turnaround plan that will help the business recover from the deep.
  3. When insolvency becomes a conclusion, it is important to take a creditors’ voluntary liquidation to avoid any winding up petitions to surface. Although such business recovery option seeks to formally close the business, it is a good way to do so and allows the entity to liquidate its assets and distribute the proceeds to its creditors.
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