Does administration provide a light at the end of the tunnel?
The buy-out of the fashion chain Joules by retail giant Next is a timely reminder that firms in administration can still have a future.
Joules formally fell into administration in mid-November, putting 1,600 jobs and the future of the retailer’s 132 shops at risk. By that point the value of Joules’ shares had fallen by more than 95% over a 12-month period, to 9.22p. At that price, the company’s market value was £10.3m. Its net debt at the end of October was £25.7m, with a £5m revolving credit facility due to be repaid on 30 November.
However, a rescue deal was secured and the jobs and shops saved, mainly due to the efforts of its administrator.
If you’ve considered entering into an insolvency process, administration could allow you to sell your business as a going concern. This is something our licensed insolvency practitioners can guide you through – remember, we save businesses as well as ensuring, when needed, they are closed in accordance with the law.
If your business could be viable going forward and administration is your chosen path, there are a number of options we might recommend. In this article we focus on two:
An open sale
With an open sale, it’s vital you get your business as fit as possible before it goes on to the market. In most cases, this means cutting costs to make your business more attractive to potential buyers.
It may also involve selling assets, in order to raise cash to reduce the amount your company owes its creditors. Don’t worry about having to do this alone. Once your company is in the administration process, it will be the administrator who makes these decisions and finds buyers for your assets.
Once the business is put on the market, we’ll act to achieve the best possible price. We won’t necessarily be looking for a quick sale, but neither will we want the business to be on the market for too long.
Basically, a pre-pack administration is a way of legally disposing of a business by selling it to a third-party buyer, or the company’s own directors. The latter option means that, if the circumstances are right, you can buy back your own company. This process can only be overseen by a licensed insolvency practitioner.
We’ll first advise on the preparation of a detailed financial statement that outlines the state of your company’s finances, which will help us plan a course of action.
We’ll then work with you to decide if the best way of saving the company is potentially to sell it to the current directors or a third-party. If this course of action is available to you, and should you opt for it, we’ll ensure this is done legally and work with the company’s creditors so that everyone is on the same page.
Insolvency laws state that the sale of the company assets must be valued by an independent assessor, on which the sale price will be set. This price must be a reasonable and fair commercial price. Furthermore, the funds for the purchase must come from outside of the company – that is to say, paid personally by the buyer.
It’s important to note that once the necessary legal documentation has been drawn up, the business will be advertised for sale, even if you would like to buy it back in an ideal world. This, of course, means a competitor or other interested party could purchase it, subject to it meeting the relevant terms and conditions.
The message here is that all is not lost, even when a company is put into administration. Our licensed insolvency practitioners and business rescue experts will be able to assess your situation and advise you accordingly. All the possibilities for the future of your business will be duly considered and we’ll try to achieve your aspirations wherever we can.