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Corporate Restructure

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Corporate Restructure
Whilst “insolvency” may be conceptual, the “fact” of illiquidity requires due diligence to establish. It can take a long time for the signs of financial meltdown to display in a business. The owner maybe ‘fire-fighting’ daily, chasing debtor cash to pay the next creditor making threats, and keeping the bank within limits whilst juggling PAYE and VAT payments that are several months late already.

Even in such an unhealthy scenario, the business owner is always hopeful, but the reality of the problem is usually obscured by the diversion of management’s daily fight.

There is a point where only specialist help will do. Colonnade should be your first call when cash and debt issues are restricting the business from being able to do further business.

Owner managed SMEs
Generally, many SME companies have a simple capital structure, perhaps with a single class of ordinary shares and one or two shareholders. Debts are likely to be bank loans, trade creditors and HMRC for any such business in crisis.

Restructure will be considered where cash does not meet debts as and when they fall due. The risk exists that without intervention, the directors of the company may be trading illegally. This is not a straightforward assessment to make.

Colonnade can identify and confirm whether the Directors are in this position or not and set about presenting options available to the Board. Where the Directors are trading illegally, the only solution will be to advise on the appointment of a qualified insolvency practitioner immediately.

In all other instances, Colonnade offers a last ‘pre-Administration’ opportunity to assess what other options remain. Our work can involve discussions with management and staff, disposal of stock or assets, changes in corporate structure and/or working methods, relocation and other cost reduction exercises and/or consider bringing in new business. We can also enter discussions with particular creditors in order to obtain debt ‘write-offs’ where possible, all with a view to giving the business breathing space and see if it can trade through.

Larger SMEs and Mid-Caps
Larger private companies may have a more complex capital structure, possibly with several shareholders, more than one class of share, loan note holders, convertible or non-convertible debt, debenture loans and/or bank loans mixed up between long and short term debt, some of which may carry interest or deferred interest.

Colonnade offers the same service as with owner managed SMEs, adapted only to account for the variety of different interests that exist in the debt/equity mix. In addition to the above and assuming the directors are not trading illegally, we can also offer the possibility of a rescue via our ‘umbrella’ Company PHI, which will account for all the different interests, shareholders, loan note holders, secured and unsecured creditors and any other interests. This source has access to outside funding and trade buyers.