Turnaround Finance

Turnaround involves the restructure of a financially challenged company with or without the use of a formal insolvency procedure. This is only relevant for companies that have a viable business that can, when/if freed from burdensome debt, trade profitably.

The “Turnaround” culture for financially distressed companies now firmly exists. It is understood by financial institutions and of course the accounting and insolvency professions and is particularly good news for entrepreneurs and risk takers who are so vital in industry.

What is Turnaround?

It can simply involve an informal workout with a key group of creditors but is more likely to include a detailed appraisal of the company’s trading operation and the implementation of a programme to ensure the company survives and returns to profitable trading.

A well structured turnaround programme can avoid formal insolvency.

The key elements to a turnaround programme include:-

  • Assessment of the business to ascertain whether it is viable;
  • Identification of areas for restructuring and development of a programme for the implementation of changes required. This alone may not be sufficient to ensure the company can move to a positive trading position;
  • Address cashflow problems by introduction of new/additional sources of funding. Funding options include debt, stock, asset finance as well as general and equity finance. Half the battle is knowing who to talk to;
  • Management of turnaround programme. The company’s management team is likely to need support in the early stages of implementation. Part of the programme may require changes in the structure of the management team.

We offer an initial free consultation on the various options that may be available to the company. If turnaround is appropriate, we will provide an estimate of the costs for carrying out a viability review and assisting with the drafting and implementation of the turnaround plan.

Insolvency Advice

Our experienced partners’ turnaround consultants can assist businesses in financial difficulties to implement a strategy to get the business back onto a sound financial footing so that it can continue unaided.

The scope of the work is very much tailored to individual circumstances to ensure the business can successfully operate with the minimum of interruption whilst the review is taking place. Our partners willingly operate alongside the client’s existing financial or legal advisers to ensure the work is carried out cost effectively.

The objectives of the strategy will be to assist your company to regain a strong independent financial position and a sense of direction to ensure the business has clear targets.

Businesses facing financial uncertainty generally benefit from an initial external overview which can identify underlying problems. Upon identification we can use our experience to offer practical solutions to remedy the problems. By utilising our contacts in all areas of business we are able to bring the business all the skill sets that may be missing within the current structure.


The company has cash flow problems, can I safely trade out by cutting staff and overheads?

It is important that whatever steps you take does not result in the position deteriorating for your creditors. You need to prepare a plan for trading out which starts with up to date accounts and balance sheet and then incorporates forecasts to cover your trading out period. This plan needs to be discussed with the company’s senior people and then embraced.

During the course of the recovery stage, constantly review the process, minute your meetings and compile information as to your actions. In the future if the plan does not work this helps defend your actions.

If it is apparent that you cannot get creditors to agree to withhold action and also that your cash flow falls short of meeting the company’s ongoing liabilities, you need to seek advice from a licensed insolvency practitioner.

There are rescue procedures which will prevent creditor action and also provide debt forgiveness which may relieve the pressure on your company’s cashflow.

The company needs to downsize its workforce but cannot afford the redundancy costs.

It is possible to get assistance from The Department of Trade and Industry (Redundancy Payments Office “RPO”) to contribute towards these costs. The company will have to demonstrate that it lacks the funds to settle these costs and that the assistance will in turn help to save a significant number of jobs. The RPO will require that the monies advanced to your company’s employees are repaid by the company or perhaps even an associated company and the timing of the repayments will depend on the company’s financial position. For more information click here.

Will the Revenue agree a payment plan?

It is possible to reach an agreement with HM Revenue and Customs “HMRC” which could allow the company to repay arrears over a period. HMRC operate a time to pay scheme and depending on the company’s circumstances, this could allow the arrears to be cleared over a relatively short time period. The factors that the HMRC will consider is the company’s history of making payments, has the company failed to keep to payment arrangements in the past, or all the returns up to date and what your proposals are for keeping up to date with your current commitments.

Also through your local business link, HMRC operate a Company Rescue Scheme which again could allow the arrears to be cleared over a period.

In our experience it is rare that HMRC will allow any more than 6 months to clear the arrears. It is important to note that the debts of HMRC are now unsecured and would rank equally with other claims if the company entered into a CVA (link). For example, the company may be able to propose that the debts of unsecured creditors are paid over a five year period and that a proportion of the debt is written off.

Dealing with a creditor who will not agree to a payment deal.

Trying to get all your creditors to agree to a payment deal is difficult as they will all want to improve their position. The directors must be careful not to prefer (put the creditor in a better position that it would otherwise have been but for your insolvency) a creditor. If the company eventually went into liquidation such transactions can be reversed by a liquidator. However, the pragmatic answer is – if payment to that creditor, at the same time as doing a longer term payment deal with others, ensures the overall survival of the business then it may be the correct decision to take. If the overall plan MAXIMISES THE INTEREST OF ALL CREDITORS then it is a logical step to take. Be sure as ever to note this at a management or board meeting in case the plan does not work.

What are the alternatives to struggling on with an informal plan?

There are rescue options including CVA and Administration which can provide very useful breathing space whilst a restructuring plan is put into place. The CVA in particular will allow the company to repay it’s debts over a period of time, which means that the company can put it’s working capital to better use. A CVA can provide that the company retains all it’s assets plus debtor receipts and in turn pays an affordable monthly sum to a Supervisor to distribute to unsecured creditors.

For example:-

We have recently assisted a construction company save around £14,500 a month – it was trying to clear unsecured debt at the rate of £17,000 per month and creditors have now agreed a monthly contribution of £3,500. The company can now afford to pay for materials and labour required for contracts.

Sometimes the burden of debt is even too great for a CVA to be viable and what is needed is a fresh start. The Administration process is often used to save the core business. A sale of the business can be negotiated relatively quickly whilst the company’s assets are protected from creditor action by the Administration Order.

What types of liquidation are there?
  • Members’ voluntary liquidation (or members’ voluntary winding up) – this is when the shareholders of a company decide to put it into liquidation, and there are enough assets to pay all the debts of the company, i.e. the company is solvent.
  • Creditors’ voluntary liquidation (or creditors’ voluntary winding up) – this is when the shareholders of a company decide to put the company into liquidation, but there are not enough assets to pay all the creditors, i.e. the company is insolvent.
  • Compulsory liquidation (or compulsory winding up) – this is when the court makes an order for the company to be wound up (a ‘winding-up order’) on the petition of an appropriate person. If there is more than one director, all the directors must jointly present the winding-up petition – a single director cannot present a winding-up petition.

If you are a director or a shareholder and you are also a creditor of your company, you may wish to present a winding-up petition on the grounds that the company cannot pay its debts.

Where can I get advice about liquidation?

Before you take any action to put a company into liquidation, you should obtain your own legal or financial advice about this procedure and any other options available to you. You can get advice from your local Citizens Advice Bureau, a solicitor, a qualified accountant, an authorised insolvency practitioner, any reputable financial adviser or a debt advice centre.

What are the alternatives to liquidation?

Informal Arrangement – the company could consider writing to all its creditors to see if a mutually acceptable agreement can be reached. It is advisable to include a timetable of when payments will be made.

Company voluntary arrangement (CVA) – this is a formal version of the arrangement described above. The directors would need to apply to the court with the help of an authorised insolvency practitioner, who would supervise the arrangement and pay the creditors in line with the accepted proposals.

Administration – this is a court procedure that gives the company some breathing space from any action by creditors. A court can grant an administration order to enable the company to:

  • Survive, in whole or in part, as an ongoing business;
  • Organise a voluntary arrangement or compromise with its creditors;
  • Get a better realisation of assets than would be possible if the company went into liquidation.

The procedure is managed by an administrator, who must be an authorised insolvency practitioner.

For a full list of our services, please see the services section of the website.