Relaunch after bankruptcy

Controlled bankruptcy

Going bankrupt just means the termination of an enterprise in dire financial straits. Through a controlled bankruptcy the activities of a company can be preserved. When the receiver can realise a relaunch with such a controlled bankruptcy, he can save a part of the employment and can obtain cash for the creditors. A relaunch after a bankruptcy can only succeed when a buyer is found quickly. This will lower the costs which enhances the chances of the relaunch. In general the latter will succeed because the old owner wants to relaunch its business or because the business is taken over by a colleague in the same industry.

Buying from a receiver

With a controlled bankruptcy, the chances are lower that another person or legal entity will take over the enterprise. In a bankruptcy stocks and inventory can be sold separately, but when a relaunch is possible, that is the preferred route. Firstly the receiver will try to transfer the enterprise as a whole or partially, because this achieves the highest price. Furthermore it can realize the conservation of personnel and employment.

Relaunch after bankruptcy

Is a relaunch after a bankruptcy desirable? Is it inevitable that the enterprise must stop or goes bankrupt, but you would like to continue with the economic activities because you are stuck with an expensive lease or too much personnel? In these situations a relaunch can be a wise decision. Preparing the bankruptcy can simplify such a relaunch. An enterprise remains stronger when it prepares a potential bankruptcy when it is still doing well. When you start in a later stadium with the preparations for a potential bankruptcy you can still limit the damage and directors liability, although a controlled bankruptcy will be harder to realise.

Controlled relaunch

A receiver normally only sells the assets of the bankrupt legal entity. When there are pending contracts which are transferable, these will be sold together with the assets. The entrepreneur who relaunches its enterprise after a bankruptcy does not have to take over the lease and only takes over the personnel which he can pay. The receiver must acquire approval for such a controlled relaunch from the examining magistrate in advance. He must be able to explain to this examining magistrate the reasons for the agreed terms. Whether the acquisition of the bankrupt enterprise succeeds, depends mostly on the speed of action. This factor can be price-determining with the purchasing of assets. The same goes for entitlements of third parties. A controlled relaunch is therefore easier when important entitlements are laid down with a sister enterprise or with the holding.

Legal and practical hurdles

Banks often demand pledges when companies are in dire financial straits and suppliers often have reservations of ownership on parts of the inventory. This has to be solved by the receiver when the bankruptcy sale starts. This is, after all, because the receiver cannot sell more than he has in his possession. Although it can be that the acquisition of property from a receiver is relatively cheap, it can add up to a substantial amount nevertheless. It is therefore wise to take an attorney with you to the negotiations with a receiver when buying an enterprise which is bankrupt. He knows how receiver operate, to which details of pricing you should pay attention and what the conditions can be with the supply of property. This can spare costly fines when you e.g. pay the receiver too late.

Do you want to know more about a relaunch, a bankruptcy or what you can do when confronted with a potential bankruptcy? We advise and accompany regularly with relaunches. For more detailed information you can contact one of our attorneys.