Unknown Threat to Solvency – Cyber-Attacks and Insolvency
The MK Team here at BRI were approached by an international visual effects company who had been the victims of a cyber-attack. As you would imagine, the attack was unexpected and became the root cause of significant cash flow issues, as it had meant the company was unable to confirm any new work, with global franchises who were seeking their services, until the IT server had been rebuilt and protected from future attacks.
Although the company were suitably insured against cyber-attacks, a delay was being experienced with the insurance pay-out. Unfortunately this delay was critical for the business and threatened insolvency. The best way to proceed in these situations is to act fast. If you or your company are in financial difficulty for any reason, contact the team at BRI today.
Creditor Pressure Following a Cyber-Attack
Following the cyber-attack and subsequent cash flow issues the company was now facing mounting pressure from HM Revenue & Customs (“HMRC”) who were in the process of serving a winding-up petition in relation to unpaid liabilities.
Prompt Response from BRI
Due to the time scale imposed from the impending winding-up petition, there was a limited period within which to assess the position and compose a strategy. However, BRI’s prompt adaptability, strategic planning, and commitment to achieving the best possible outcome for all parties saw them engaged to act as nominees for a Company Voluntary Arrangement (“CVA”), with a proposal for the same produced and filed at court.
BRI had recognised early on that the company had a fundamentally viable business model, a strong international client base, and a pipeline of future work, but had been hampered by the cyber-attack and the insurance pay out being delayed.
Critical Assistance and Engagement
One of the pivotal aspects of BRI’s intervention involved engaging in direct communication with HMRC. We provided a clear and honest view of the company’s financial standing, its potential for recovery, and a realistic plan for repayment of the outstanding liabilities. This transparency played a crucial role in building trust and ensuring the company’s majority creditor was consulted on the proposal, which promised to repay 100p in the £, and understood that the alternative outcome would likely result in a significantly lower return.
As it happens, the company received the insurance pay out and signed a significant contract with a customer just days before the meeting of creditors was due to be held and which the CVA proposal would have been approved.
Return to Solvency and Ability to Pivot in the Best Interests of All Parties
The insurance pay-out and new customer contract meant that the company had returned to a solvent position and could discharge its debts prior to the implementation of the CVA process. BRI quickly informed all parties of this situation and confirmed, as the Nominees, that the company no longer required a CVA process. Therefore, the company was able to continue trade with no interruptions, disruptions or concerns raised by suppliers. HMRC received immediate payment of their outstanding balance, and the threat of a winding-up petition was removed.
By working to ensure that the CVA process was not implemented as soon as it became apparent it was no longer required, BRI achieved the best outcome for the company and its creditors while reducing the level of potential fee income that could have been achieved for themselves via the process going ahead.
The BRI Approach to Companies Facing Threat of Insolvency
This case highlights the critical role that the experience and adaptability of BRI can play in guiding companies through financial distress during periods of uncertainty. Through fast action, open communication, and tailored recovery strategies, BRI not only helped preserve a long standing successful business but also protected creditor interests, whilst avoiding the costs and disruption of insolvency proceedings.
For businesses facing financial uncertainty, this success story underlines the importance of seeking expert advice early, and the mantra that BRI prides itself on, providing the right advice first time, every time, irrespective of the fee outcome. If your business is experiencing an increase in financial challenges, please get in touch with BRI to discuss the options available, free of charge.