Corporate Reconstruction

Corporate reconstruction and turnaround are the processes that are implemented to help a business in distress.

At Irwin Insolvency, we have become increasingly active with businesses at an early stage of crisis in a ‘company doctor’ role, to advise on corporate reconstruction, turnaround and work-outs before a state of formal insolvency is reached.

There are many types of corporate reconstruction, as the process depends on the problems that are occurring at the business. However, it is often that the reconstruction process will include the formation of a contract that will indicate how the business should be operated to resolve its current issues and following this how much and when the creditors will be repaid.

The reasons why a business may seek corporate reconstruction includes:

• Preparation for sale
• Increase profits
• Tax efficiency
• Segregation of trading and/or investment activities
• Avoid the insolvency process

How we can help to solve the problem

The financial world recognises that insolvency is a ‘business problem’ and Irwin Insolvency are increasingly being asked to provide professional advice to avoid the formal insolvency process.

Work-outs, in particular, have become important. Often creditor led, the objective is the reduction of indebtedness by way of the disposal of assets but, most importantly of all, formal insolvency is avoided and the business lives to trade another day.

In a corporate reconstruction, valuations are used as negotiating tools with the creditors. To ensure a successful reconstruction, the agreement between the business and creditors needs provisions established to prevent the creditors making demands for payments, enforcing their security or initiating any formal insolvency procedures.

Therefore, with provisions in place with the creditors, this will prevent any claims against the business and make the reconstruction process much more effective.
The results of corporate reconstruction are very effective in the short term, by addressing the issues the business is facing and having a plan of action to take the necessary steps to ensure the business does not go into liquidation.

Is reconstruction the right move?

To ensure long term success of  business reconstruction, managers are responsible to ensure as their environments change that the business can continue to grow, and debts are repaid. It is therefore important to assess whether reconstruction is right for your business, to develop a sustainable competitive advantage whilst removing any financial issues.

To find out more information about corporate reconstruction and turnaround and whether it is right for your business, contact Irwin Insolvency today at 0800 009 3173 to speak to one of our specialists.