At BRI, we work with companies in various industries to advise them on the best way to move forward when they run into financial problems. We support our clients and help them find alternatives to insolvency where possible. In this case study, we talk about some of the work we conducted with a recent retail client.
Retail rescue with BRI
BRI were initially contacted in January 2024 by a client wanting some initial advice and guidance regarding their company.
The Company was a retailer, providing high end clothing products. The Company operated mostly online but also had some concession stock in retail outlets in the UK and Europe. During the pandemic, sales declined, and the Company applied for a number of loan facilities in order to assist with cashflow.
Unfortunately, post pandemic, the financial position of the Company did not improve and the repayments on the debt, of which most had been personally guaranteed by the director, was crippling finances.
Initial meeting with BRI
During the initial meeting with BRI, our team advised the director about what steps they needed to take to protect the interests of the creditors in the event that the Company was not able to avoid insolvency. We also discussed how, as a result of the Company being technically insolvent, their duties and responsibilities as the director had changed.
Whilst the director did not believe that an insolvency process was required immediately (at the time of our meeting they were in discussions with investors to raise funds), they wanted to be better informed should a formal insolvency process be required.
Is there an alternative to insolvency?
In February, the director contacted BRI again as no investments were secured and the director could not see a way forward for the Company or an alternative to insolvency.
BRI carefully reviewed the financial position of the company and was of the opinion that instead of immediately placing the Company into an insolvency process, the position should be managed very carefully. We advised that a period of marketing should be carried out to see if there were any interested parties willing to buy the business/business assets.
Market the business for sale
BRI introduced the director to an independent agent to provide a valuation and market the business for sale. Selling a business or business assets can be an alternative to insolvency for some companies. If this is something you are considering for your company, contact the team at BRI today for expert advice and guidance.
It was clear from the valuation that it would be in the creditors’ interest if an “in-situ” sale could be achieved as the assets are generally worth more in that scenario compared with a forced sale auction sale.
Ongoing support from BRI
The director, agent and BRI met with the director on a weekly basis to offer support, guidance and to assist with monitoring trade to make sure that it was viable to continue with the marketing exercise. Following a period of marketing, a number of offers were received, including an exceptional offer from an investment company (“the Investor”) to buy the shares of the Company.
The agent and director met with the Investor to make sure the director, who had been asked to continue working for the Company if their offer was accepted, was comfortable with the terms being proposed. Following negotiation of acceptable terms, a decision was made by the director to accept the offer which meant that an insolvency process would not be required as the Company was rescued by finding an alternative to insolvency.
Sale of the business and jobs saved
The sale of the shares to the Investor meant that all creditors would be paid in full which also meant that the director would no longer have declare bankruptcy as a result of the level personal guarantees that had been provided. In addition, all employees retained their jobs following the sale.
Seeking early advice to assess all options
The key to the above strategy was time. We had the time to market the business, without the immediate threat of creditors taking legal action or putting stock accounts on stop. Had the director not taken advice early, the agreed strategy would have been very different. It is likely that the Company would have had to enter into an insolvency process in order to try and protect the assets for the benefit of the Company’s creditors.
Taking advice early and considering all of the Company’s option, does not mean that a Company will stop trading/enter into a formal insolvency process.
Seeking advice as early as possible will always give you best possible chance of avoiding formal insolvency.
If you require help or advice for your company, please contact our team today. We can work with you to determine the best possible route for your business and keep you informed along the way. Reach out to us today for your free, no obligation initial consultation.