All businesses incur difficult bumps in their life cycle, many outside of their control. It is therefore important to be aware of the options if your business is incurring difficulty.
Identifying the issue and acting quickly is essential. Engaging an expert to assist with implementing a turnaround or restructuring strategy for your business is key.
If you are experiencing difficulties in your business, some available options to be aware of include the following:
Business Performance/Solvency Review
Look for the warning signs. These may include cash flow stress, insufficient working capital or pressure from creditors.
If you’re unsure whether your business is viable and can continue as a going concern it is worth engaging an expert to conduct a professional review and assess the financial position of the business.
Safe Harbour is a tool used to protect directors whilst undertaking a turnaround or restructure of a business. Directors must take a course of action that is reasonably likely to lead to a better outcome for the company and creditors as a whole.
It also provides protection to directors from insolvent trading if the turnaround or restructure is ultimately unsuccessful and the company goes into liquidation. Directors must meet specific criteria and take certain actions to benefit from the protection.
Operational and Managerial Restructuring
Identify weaknesses within the business or areas of concern and implement strategies to improve those areas and streamline your business.
Internal restructuring may include improving inventory management, improving collection of your debtors, optimising cash flow, negotiating payment plans with creditors or enhancing your marketing techniques to attract new revenue. A small change may make a big difference.
On a larger scale, it may include raising additional capital or winding down/selling distressed non-core areas of the business.
The aim is to increase revenue or create cost savings to boost the performance of your business.
Sell Your Business
Selling your business can be complex. It will involve preparing your business for sale, considering the taxation implications, implementing a marketing strategy, valuing your business, setting an appropriate price, engaging in negotiations and ultimately settling the sale and transferring the business to the purchaser.
Selling your business is a big decision. It is important to seek advice to ensure that this is the right option for you and to assist with the sale process.
Voluntary Administration involves the directors appointing an independent expert to investigate the company’s affairs and recommend the best options for the future direction of the company. The aim is to save the business, or if this isn’t possible, create a better return to creditors than if the company was wound up straight away.
It is often used as a successful form of restructuring where the business can emerge trading or as a method of sale. Proposing a Deed of Company Arrangement may also be possible which provides a flexible arrangement with creditors.
Winding Up the Company
Sometimes there is no other option and a formal appointment of a liquidator can be used as a last resort to wind up insolvent entities.
Should you require turnaround or restructuring advice on any of the above, please contact Nigel Markey or your Pilot advisor on (07) 3023 1300.