12 August 2019: A recent rescue enquiry gave our Milton Keynes BRI office opportunity to flex the grey matter with respect to finding a solution to the not uncommon issue of a company having both successful and unsuccessful elements to its business. The particular company ran cafés/restaurants and had two premises. One café was becoming well established while producing a small profit, the other, despite the best efforts and considerable financial endowment of the directors was still loss making.
Separating out elements of a business via an insolvency process is by no means a straight forward feat. Issues such as TUPE liabilities, existing leases and guarantees, along with other financial commitments can create too tight a knot to untangle. In this instance, after exploring the full menu of options, including a company voluntary arrangement (too damaging to cash flow and unlikely to succeed), Administration (an oasis of professional fees but given the level of assets within the company unlikely to produce the best outcome for creditors) it was concluded that, other than a fresh injection of capital, a liquidation was the only feasible option to be followed.
Despite the necessity for a liquidation process for the company, it was clear that the directors desired to maintain the profit making element of the business. Therefore, following professional valuations being carried out on the company assets, a sale was achieved to a new company set up and ran by the directors. Such a sale enabled previous contracts and leases to be novated, thus limiting the level of creditors who would suffer from the company failure while also keeping several staff in employment. The directors were also able to mitigate the liabilities of personal guarantees unwittingly signed at the outset of the business. We are beginning to see personal guarantees becoming more common and they do potentially present an obstacle to the restructuring of a businesses as directors have less scope to obtain new investment.
BRI assisted with placing the company into liquidation and believe that the best outcome for all stakeholders has been achieved. Yet again here at BRI, throughout discussions with the company directors, we strove to achieve the right outcome regardless of the potential fee outcome for ourselves.