What steps have to be taken and when?
Some companies have a succession plan in place and ready to go so there is a minimum of fuss during the transition and the business can continue to survive and thrive afterwards without the founder.
For many smaller businesses, especially partnerships and sole traders, this seismic shock could prove insurmountable.
While some companies can continue as going concerns, loved ones, relatives or employees might not want to continue the business, especially if it was a labour of love for the departed. They may already have other careers or interests that would be incompatible with the hard work of running a business. They might want to sell it to somebody with the talent and interest to continue the business or realise that it might be better for its story to end with the owners.
Alternatively, if shareholders have differing views about the direction of the company then a legal succession battle could damage the business permanently as the energy and vision of the parties are directed at this struggle rather then the day to day running of the business.
Nobody likes to think about the inevitable but death is the one constant for everybody – the only variable in the equation is when.
All businesses should have a succession plan, not only to ensure an orderly transition but one that can be implemented following any unforeseen calamities. At the very least these must include essential components such as digital legacies including login details, passwords, access to email correspondence and cloud storage as well as financial essentials such as access to bank accounts and up-to-date information on assets, liabilities, debtors, creditors, payment schedules and more.
After duly considering all the available evidence and factors, if the best option is to close the company then a Members’ Voluntary Liquidation (MVL) process is the most efficient.
Processes like administration and liquidation are widely associated with business failure but this isn’t the case at all. Many otherwise successful and solvent companies have closed using an MVL for a variety of reasons. Not just unexpected bereavements but retirements or family businesses when nobody was available or able to pick up the reins.
The process is relatively simple. An insolvency practitioner reviews the assets and liabilities of the company to make sure that all creditors including future and contingent liabilities, can be paid within the first year of a liquidation. They will then certify a declaration of solvency that will allow the liquidation of the company to go ahead.
Alternatively if the company is struggling and becomes insolvent then administration can be a solution. It will freeze all creditors demands and allow time for all pertinent financial information to be gathered together and examined thoroughly.
An administrator is appointed to run the company on a day-to-day basis while they do the important and necessary job of preparing the company for the process. Ultimately the company could still come to be liquidated or dissolved, it could also be sold to a new owner wholesale as part of as a pre-pack administration.
This is where an insolvency practitioner prepares the business and its assets to be sold as a going concern and that the marketing for sale and sale terms are set out ahead of entering the formal insolvency procedure.
We’re always happy to talk to people about the future of their business. Especially if the future is unclear or the decision about the business’s future has been made and you don’t know the best way to proceed.
If you’re an employee in a company that is facing these issues then there is also support for you and your colleagues from the National Insurance Fund.
Contact one of our expert advisers today to set up a consultation where we can discuss the best options for the business and for you.