Post-insolvency restart organised in advance
A client with two companies in two different cities realised that one of the two locations was not doing well; the economic situation had caused a drop in sales. His business operated in a sub-sector of the construction industry. He had found a buyer for some of his activities and was keen to continue the remaining activities through his other company. In the mean time, his debts were increasing due to high rent and a number of employees being on long-term sick leave. There were a number of other problems as well, but these were the main relevant issues.
To get rid of the expensive rental agreement and unaffordable employees, the company needed to file for its own insolvency, but there was a risk that the liquidator would sell everything to a third party. We needed to make sure this didn’t happen.
In the end, I drafted a clear, simple agreement between the buyer and the company, which went into insolvency a week later following an insolvency application that I filed on its behalf. I included a provision ensuring that the buyer would not pay the purchase price until the company had been declared insolvent. It was also agreed that the activities and equipment that my client wished to buy for his other company would be sold on by the third party to whom the business was sold.
The company was declared insolvent and the liquidator made the logical decision that we had predicted and hoped for. After some minor revision of the arrangements with respect to the timing for clearing out the shop and the termination of the rental agreement by the liquidator, the buyer was able to transfer the purchase price and matters were settled as intended.
This allowed the liquidator to ensure that the creditors still received some of their money and the intended buyer continued the principal activities, so that a number of employees were given jobs. My client was soon able to get on with those activities that he wished to continue.
Even in difficult times, with a little creativity, a practical approach and minimal losses problems can be reduced or even resolved. As long as you don’t just sit around waiting for a solution.