Using Administrations and the Pre-pack process to protect businesses

www.ifa.org.uk

Steve StokesPartner, FRP Advisory

11.05 - 11.45 pm

Administration – Protecting businesses and preserving value

Steve Stokes PartnerTel: 0121 710 1682 or 07764 989 009Email: steve.stokes@frpadvisory.com

Contents

Introduction Administration Pre-packs Case studies What we are seeing Key messages Questions

Introduction

FRP Advisory LLP FRP has nine offices and employs over 200 staff nationally They offer services to businesses and individuals who are

facing financial or operational uncertainty

Steve Stokes Steve is a partner in FRP’s Birmingham office He has over 14 years experience of advising lenders and

directors on corporate restructuring and insolvency matters across all sectors

Steve has forged strong relationships with both the regional banking community and a variety of intermediaries including accountants and lawyers, providing both them and their clients with a solutions driven approach to the issues being faced

Administration

The rescue culture Preserve value... preserve your client base !

Administration

Available to:-

Limited Companies Public Limited Companies Limited Liability Partnerships Partnership

Entity needs to be, or likely to become INSOLVENT

Main alternative insolvency options are Company Voluntary Arrangement or Creditors Voluntary Liquidation

Administration

Application filed in Court gives moratorium

Application made by:

Company Directors Creditors Holders of a floating charge

Administration

The Administrator must try to achieve the following objectives:-

rescuing the company; if not

achieving a better result for the company’s creditors than if the Company were wound up; if not

realising assets to make a distribution to the secured creditors

Administration

Pre-packs

So what is a pre-pack ?

Pre-packs

A pre-pack:- achieves a sale of the business as a going

concern, however, negotiations for the sale take place prior to Administration

protects goodwill of the business minimises professional costs removes the Administrators’ ‘Day One’ issues,

such aso working capitalo landlordso employeeso ransom creditorso stock

Pre-packs

BUT lack of transparency directors buying back on the cheap perception issues around ‘best value’ no creditors meeting

Pre-packs

Giving pre-packs a bad name

Press Government Aggrieved creditors

and

……Insolvency Practitioners!

Pre-packs

preserve the good remove the bad create a viable opportunity

Case Study 1 – Pre pack Administration

Recruitment business Two directors left business Large HMRC debt remained Poor advice from alternative advisor Correct advice……. but not without risks! Accelerated sale process – engaging with HMRC Successful sale Unsecured dividend to creditors

Case Study 2 – Trading Administration

Local garage and body shop Turnover £750k Poor performing body shop function Needed restructuring – could not afford to! Time to pay agreement HMRC pressure Administration – protecting assets Short trading period allowed restructuring Trading successfully following sale

What we are seeing

As growth increases…

cash flow pressures increase in asset values continued difficulty getting funding

……more insolvencies

What we are seeing

Sectors having difficulties

Haulage Retail Print Professional practices

However…

Key Messages

Preserving value….preserving your client base

Early intervention

Restructuring and insolvency can be a positive solution!

Questions

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