Phoenix or Pre-Pack guide for dummies Have things got so bad you are thinking of cutting your losses and closing the business? Is the core idea still viable? Phoenixing (or pre-pack) lets you form a new company with the viable parts and go on to run a successful business.
Your company may be in a position where it is failing because it cannot pay its creditors. On top of that company agreements such as premises leases are no longer appropriate. If this is the case, you may be considering simply cutting your losses and closing the business. The problem with this strategy is that the business idea and therefore certain elements of the current business assets may still be viable. However, if you simply liquidate the company, the assets could well be lost.
A pre pack liquidation (commonly known as the Phoenixing process) allows a new company to be formed which then buys the assets of the old failing business. Employees may be transferred to the new business. The old business is then closed (or liquidated) and proceeds of the sale of assets distributed to the outstanding creditors.
In order to successfully carry out a pre pack liquidation, there are a number of steps that will need to be carried out. The following steps do not always follow in the order below. The correct timing to undertake each will be advised by the insolvency professional working with the company board.
There are various costs involved in the process. These are an upfront fee paid to the business insolvency specialist for the advice and assistance provided. Of course, then the funds required to buy the assets of the old business must be raised. The insolvency practitioner will take their fee for liquidating the old business from the money raised by the sale of the business assets.
The advantages of the pre pack process can be significant. The assets of the business such as important employee teams, equipment and good will are maintained whereas they may break apart if a company is simply liquidated. In addition, the liquidator will generally get a better price for the assets (especially good will) and therefore better return for creditors if they are sold as a whole to start a new business. The new company has the opportunity to operate into the future thus providing a continuing trading partner for suppliers and customers both new and old.
What happens to the directors if a company is wound up?
Once a company is being wound up a Liquidator will be appointed. The liquidator will undertake an investigation into the conduct of the directors to see whether they have knowingly allowed the business to trade while insolvent thus making the creditor's position worse. If this is the case, a director may face being disqualified and held personally liable for the company's debts. As a Director we look at the options you have.What will having a County Court Judgement do to my company
If a county court judgement remains unpaid, this could lead to more serious action being taken against the business. We look at the impact and what you can do.Company debt restructure to improve cash flow
Ensuring that enough cash is available to maintain their business must be a priority for companies. Those that do it well will survive. Those that do not are likely to fall. As such identifying problems and implement solutions which may require a radical restructuring of debt must be a priority. We discuss some of the solutions available.