Restructures

Restructuring comprises of more than just a financial restructuring project: it should combine both financial and operational factors. The ultimate objective of the restructuring project is to integrate financial and operational restructuring to rebuild the business into a sustainable and lasting organisation. Therefore a corporate restructuring professional is more than just a financial person. He or she must have the ability to operate outside of the financial world and work with directors in their particular, industry specific areas of expertise.

Turnaround strategies in Ireland & Conventional solutions

As we have set out above the processes of the more conventional solutions to corporate insolvency we will look here at where there can be a mixture of both approaches:

Going concern & creditors voluntary liquidations

Although the liquidation process is not by its nature designed to enhance the going concern prospects of a company, a liquidator is not precluded from attempting to preserve some or all of the going concern. To this end if a liquidator is appointed to a company that has not ceased to trade and the liquidator believes that there may be an intrinsic value in the business activity then the Liquidator might choose to continue to trade on his own account. If this is feasible then the liquidator will be in a position to advertise the business and assets as a going concern. In this instance it is not the company that is for sale rather its business and assets. Under such circumstances a competitor may be interested in acquiring those assets in order to expand their own business.

In doing this the liquidator will improve the assets realization for the company’s liquidation.

Court liquidation

In certain circumstances directors can find themselves in a position where they have concerns over their ability to preserve the assets of the company for the benefit of the general body of creditors until such a time as the liquidator is appointed. In such circumstances, the directors might consider making an application to the court for the immediate appointment of a liquidator thereby securing the assets for the general body of creditors.

Examination

Where a company has a reasonable prospect of survival Examination may be an option. The company however must also be capable of generating sufficient cash flow to operate for a full period of protection and of attracting a sufficient injection of capital to achieve a compromise with the creditors and the costs of the examination.

Clients are obviously inclined to prefer the Examination option over any other form of insolvency procedure as the process is designed to maintain the going concern and restructure the liabilities of the company so as to enable the company to continue to trade as normal once the Examination has been successfully completed.

Currently, with the Irish courts intimation of their dissatisfaction with the frequency or unsuccessful Examination and with a critical shortage of debt and equity funds, achieving a successful Examination is proving all the more difficult. Companies may be in a position to generate positive cash flow for the protection period but what are the prospects of there being a willing investor who has the ability to generate sufficient capital?

Receivership

Compared to other insolvency procedures directors are less involved in the Receivership process; the receiver usually takes full control of the company and its associated issues. The Receiver, acting on behalf of the charge holder, will often – in attempting to maximize the return for the charge holder – attempt to continue to trade and to offer the business and assets for sale as a going concern in order to enhance the asset values.

Unlike an Examination the assets of the company are sold and the ultimately the directors have the responsibility to dissolve the company. Normally this will be achieved through a creditor’s voluntary liquidation.

It is often in the directors personal interests to work with a Receiver. They are often exposed under personal guarantees to the secured lender, so achieving the best price possible for the assets is in the mutual interest of the secured lender and guarantor.