10 Steps to Business Recovery

Business Advice from First Recovery

1. Review and Assess. Be objective.

Review the situation as it is – look at the causes as to why your business needs help. The first thing we do at First Recovery involves a Restructuring Business Model to look at your management accounts, sales order book, banking financial arrangements, internal controls and your current customer service levels. At this point we consider the quality and leadership skills that your business has in its favour to move on to the next step.

2. Develop a Plan and Business Strategy

What can you do now to salvage your business and how much time have you got? Now is the time to revaluate your business plan – look at your business model – does it need to be tweaked? We take a serious look at Product/Market Reorientation – is it time to introduce a new product or marketing category as part of your Improved Marketing structure? Do you need to introduce new value added services that will make a difference to your customers and to your revenue? Are staff upskills worth looking at? Do your staff need to understand digital marketing for example?

Mergers/Strategic Alliances. Maybe now is the time to merge your business with another or create a strategic alliance to fill a skills gap? Either way it’s time to rewrite your business plan.The benefits of writing an updated business plan help you measure actual results. It will provide a relevant form of communication for investors, staff and the bank. It will show clearly what your future business plans are. It will also indicate to third parties that your proposed business turnaround plan has been carefully evaluated and is a viable proposition that should be supported.

3. Management

For the business turnaround to gain momentum you will need the support of your staff.

Explain, clearly, the current business model and show clearly what the consequences could be if action is not taken now. Seek feedback from your management team and involve them as much as possible in the turnaround. It is vital that you elicit the concerns of this group, address them as positively as possible and move forward as one team to bring about results. They need to be committed to the future plans if your business is to reinvent itself for success.

4. Communicate with all other Employees

It will be necessary at the earliest opportunity to meet with all employees or their union representatives, particularly if job losses are planned. A prolonged period of uncertainty, fuelled by gossip and rumour will destroy what business you have left. Communicating the bad news as well as the good news in a timely manner is essential. Use the opportunity to provide your entire staff with an insight into your future business plans.

5. Meet the Bank. Talk to your bank or investors about your plans to turn around your business.

Ideally meet them face to face if possible to seek assurances and support for the business.

6. Meet Customers

Depending on the severity of the situation within the business it may be necessary to reassure key customers of the business turnaround plans and the benefits that will accrue for them. This is the time to Review Informal Schemes of Arrangement too. To free up cash flow and to generate better credit terms consider contracting your customers into two year contracts to benefit from longer credit terms and to reduce overheads. This action should be considered mandatory if the cause of the business demise has been poor customer service, poor quality product or any other matter not meeting the expected/agreed customer satisfaction levels. Begging for a second, third or even fourth chance to ‘get things right’ may be embarrassing but remember: no customers – no business. Learn from past mistakes, do not promise what cannot be delivered and ensure internal systems, processes and communication channels are raised to a standard that will seamlessly allow business to be conducted in a timely and efficient manner.

7. Meet Suppliers

If your business has not been able to settle payable accounts on time, even the hint of business turnaround activity may result in suppliers imposing draconian payment terms that are likely to jeopardize the business turnaround recovery plan. If support for the turnaround plan has been gained from the financial institutions and investors, aim to seek meetings with suppliers in order to seek their continued support and to re-establish trust.

8. Cash is King

Review your cash reserves and look carefully at your credit management procedures. Pick up the phone and talk to your creditors – tell them the position and negotiate extended payment terms. Next consider Asset and Cost Reduction . Look at unused assets in the business and release if necessary. Be creative. Look at unused buildings, consider renting out spare office space, selling unused plant and office equipment, disposing of excess or redundant stocks, factor sales debt and if unavoidable make excess employees redundant. Remember its your business and its your job to save it. Keep all unnecessary overhead costs down.

9. Implement New Systems and Procedures

Look at existing systems to ensure that they will meet the goals of the business turnaround plan. Make whatever changes are needed and you can be assured that old practices that may have worked two years ago will almost certainly result in the same old results. Positive and profitable change may be required and this should be communicated to employees, so that they understand their roles in the new business environment.

10. Monitor, Measure and Take Action

Results should be regularly measured against plan and corrective actions taken if required. Key performance indicators (KPI) should be determined that will give a snapshot of the business performance and be available on a daily, weekly or monthly basis.

Bankruptcy

About Bankruptcy

Much confusion surrounds the area of bankruptcy in Ireland. Even though attitudes to debt have changed rapidly in recent months, there is still a social stigma attached to becoming bankrupt and a misunderstanding as to what it means. First Recovery, Ireland’s leading insolvency and corporate recovery specialists have devised a snapshot summary of what bankruptcy means.

What is Bankruptcy?

Where an individual is unable, or unwilling, to pay their debts, the High Court may transfer their property and assets to a person called a ‘trustee’ or ‘assignee’.  Once the assets have been sold, the costs, expenses and court fees are paid, the creditors are paid from the balance of available cash. Bankruptcy proceedings are dealt with by the High Court. As part of the process notice of the Bankruptcy proceedings are advertised in various newspapers. When and why do you become bankrupt? A debtor may petition the High Court to be placed into bankruptcy. In this instance the debtor aims to seek the protection from the court from his creditors and to ensure that outstanding debts are settled in an orderly manner. More likely a creditor would petition the Court to receive payment of a debt. In the current economic conditions, existing director of companies frequently give personal guarantees for debts owed by their companies.  Creditors now tend to look to personal guarantees and instituting bankruptcy proceeding against directors. Traditional the legal process to get a debtor into bankruptcy was laborious and this remedy was not frequently utilized. In February 2009, the Supreme Court in Ireland handed down a decision which, in effect, simplified the entire process and this is expected to result in more petitions being brought before the Court. All of the property of the person placed in bankruptcy vests with the trustees and it is his job to sell or dispose of the property for the benefit of the creditors. If the bankrupt is receiving a salary or pension, the High court may appropriate or garnishee both for the benefit of creditors The interest that the Bankrupt has in the family home also vests in the trustee. The trustee must obtain permission from the High Court to sell the family home. The court may authorize or postpone the sale of the property taking into account the best interest of the creditors and of any spouse or dependents of the Bankrupt. A Bankrupt cannot obtain credit of more than €650 without disclosing the bankruptcy.

Receivership

The first myth that needs to be dispelled is that Receivership means liquidation. Because it doesn’t. It is a form of bankruptcy in which a company can avoid liquidation by reorganizing  with the help of a court-appointed trustee.

The role of First Recovery in this area is to help your company stay out of trouble and start trading again if possible.
When is a Receiver appointed?

A receiver is appointed when a secured creditor holds a charge over all or some of the company’s assets and the debt cannot be paid. The receiver will take control of the relevant assets for the benefit of the creditor. The other assets are not affected and the company can continue to trade.

Main Goals

1. To rescue the company as a going concern.
2. To achieve the maximum payment for creditors which would be unlikely in the event that a company is wound up

If necessary the company’s assets can be used to make at least a partial payment to one or more secured or preferential creditors.

Liquidation

In the case of Members Voluntary Liquidation, if the reason for the existence of the company has, in fact, come to an end then the members may decide to liquidate and close the company. To do this they must be satisfied that the company has sufficient cash, or other assets, to enable it to settle its creditors in full within twelve months. A petition is made to the courts to commence the process. The petition must be accompanied by a Declaration of Solvency by the Directors. This confirms that the company will be able to pay all of its debts. This declaration must be accompanied by a report of an Independent Accountant confirming that the declaration is reasonable. The Shareholders then appoint a liquidator and the assets are disposed of and the creditors are settled.

Creditors Voluntary Liquidation

In this situation the creditors of the company seek to liquidate it with the co-operation of the company. The directors prepare a statement of affairs reflecting the company’s financial position. The liquidator’s appointment is made by the creditors of the company and a Committee of Inspection is formed to assist the liquidator. The liquidator will proceed to make the employees redundant, dispose of the company’s assets and pay what amounts are available to the creditors according to their preferential status. A fair amount of goodwill can be retained between the company and its creditors under this scenario.

Compulsory Liquidation

Here the decision to wind up is forced on the company by an order from the High Court. The petition to compulsorily liquidate the company is usually brough to the court by a creditor. The directors are required, within 21 days of the lodging of the petition, to present a Statement of Affairs to the Court. Once the court has heard the petition it will normally grant the order. It will then appoint a liquidator, usually recommended by the petitioning creditor and the liquidation process will commence. First Recovery has experienced staff to deal with all types of liquidations. In addition we can also:

1. Prepare the Reports of Independent Accountants
2. Assist in the preparation of Declarations of Solvency
3. Assist in the preparation of the Statement of Affairs

The liquidation process can be extremely stressful and can, frequently, result in litigation. This may arise from disputed claims, disputed security or former members of staff claims. Issues may also arise from the Office of the Director of Corporate Enforcement regarding actions of the former directors.

Examinership – Reducing The Social Stigma

The day to day running of the business remains under the control of the directors. The social stigma of winding up is reduced.

1. The process has a short completion life
2. The company survives.
3.  Fresh investment may be attracted
4. Creditors can agree to a debt write down to levels more accurately reflecting underlying asset values

The company can be better financially structured.  Invariably creditors will be financially better off and the time lag is much reduced. Overall a far better solution is delivered rather than just winding up your business.  First Recovery has the expertise to assist you on all aspects of the examinership process. We have staff who have had many years of hands-on experience in this type of work. We understand the local environment and we can help you in the following tasks:

1. Accept examinership appointments
2. Advise you on the preparation of the court application
3. Prepare the report of the independent account which must accompany the application

When problems escalate out of control then the Examinership process begins. This does not necessarily mean that your business can’t be saved. Going this route gives the company full protection of the courts while it’s sorting out its financial affairs. The process can provide a number of worthwhile benefits

Corporate Recovery

Depending on the severity of the circumstances we will evaluate how your business can be financially restructured to achieve a recovery from its current position. We will evaluate your business problems and conduct an immediate financial assessment.

Then we meet you with your bankers. First Recovery will make practical recommendations to help you and your bankers to work through the difficulties and, yet, help you retain a positive ongoing relationship with your bank.  Our experienced negotiators will help you in relation to negotiating with creditors/suppliers. We will discuss every type of amicable solution with your creditors, banks, Revenue and others to negotiate an immediate plan for corporate recovery. Where possible we will help you establish various schemes of arrangement raising finance. There are many ways of raising finance from your company’s assets without damaging the structure of the business. Our team can call upon many known private investors and lenders to re-finance some, part, or the whole of the business. If the situation is desperate, and everything is sinking fast, it is better to have a controlled salvage using experienced experts rather than delaying which will allow the ‘commercial pirates’ to plunder. The team can  direct the known experts who will help protect Directors, Management, Employees and Shareholders. A quick rescue through an injection of new capital can be implemented as can specific project funding be placed. The primary objective within any financial restructuring is to ensure the continuation of your business. Banks, creditors, Revenue and staff will all want your business to survive, to maintain operations and a desire to resolve the situation.

Restructuring your business is our objective and our Corporate Restructuring team draws on its wealth of experience and knowledge to develop innovative solutions to our clients´ most complex problems.