Yes, if your business is on the verge of insolvency and is about to run out of money, you might want to get rid of it in a way that saves money, such selling it on the open market.
As an alternative to liquidating your firm, you might want to get your company ready for sale and draw in potential purchasers to make an exit easier.
Due to the poor condition of your company, this approach can prove difficult, but there is a whole market devoted to the selling of troubled firms.
The first stage in selling an insolvent firm is to choose a sale strategy and decide whether to work with a highly qualified business transfer agent to oversee the transaction.
You can obtain access to a vast network of business connections, entrepreneurs, and turnaround specialists looking for their next business acquisition opportunity by working with a business transfer agent simply make contact with us and we will connect you with buyers who have a track record of buying businesses such as yours.
Purchasing a distressed or bankrupt firm is a cheap and efficient way to recycle enterprises with the review to restore their health, stabilise the corporate structure, and assist in guiding the company to a position of producing significant profits. Your floundering company can be turned into a high-climbing, commercial entity with the right ownership and financial backing.
How can I sell my insolvent business?
If your company has operating liquidity, you can be in a better position to sell it and get a higher profit than with a pre-pack sale. This will probably rely on the company’s cash flow since if you have enough working capital, you could be able to attract more competition and convince them to accept a cheap offer.
There are strict rules that must be followed when selling an insolvent business to guarantee the best return for company creditors in a compliant manner.
You might find that a potential buyer will ask to buy a component of your firm as a viable alternative if some parts of your company are doing well but a sizable portion is losing money.
This approach may offer the best possibilities of successfully closing a business transaction if it is economical and in the interests of both parties. Due to the nature of the sale, a business transfer agent will be able to assist you at every step of the way.
What is a pre-pack sale?
An insolvency procedure known as a pre-pack administration aims to market the sale of firm assets to raise money to pay creditors. In a pre-pack sale, the company administrator, who is a certified insolvency practitioner, values the company’s assets and oversees the sale.
In the greatest interest of creditors, the administrator will assist in marketing your company for sale and sell it to the highest bidder. Existing company directors may buy company assets under a new company due to the nature of a pre-pack sale. This procedure can assure secrecy and a quick sale.
Sale on the open market
Before listing the firm for sale on the open market, the administrator may choose to trade it in the near future if there is enough working cash available.
Given that there may be greater competition, this may fetch a better price than a pre-pack, but having the cash on hand to transact when the company is in such desperate straits is a major problem.
What type of sale – shares or assets?
A buyer might be interested in buying the assets alone or the shares of a company, depending on the situation. They might have experience turning around companies and be seeking for a company like yours.
If your company has a history of profitability, for instance, it might be an appealing prospect. They may be able to balance losses against the returns they foresee by buying solely the shares and having a solid plan to improve the company.
What could adversely affect the sale of an insolvent business?
Numerous problems could have a negative impact on the process because there wasn’t enough time for the due diligence procedure, which is typically a crucial component of a business sale. These comprise, but are not restricted to:
- No warranties or indemnities are provided, so a potential buyer won’t gain from the added confidence that they would provide to a business transaction.
- Transfer of Contracts: Occasionally, a buyer may believe certain contracts are included in the purchase price only to learn later that this isn’t the case.
- Under some circumstances, the Transfer of Undertakings (Protection of Employment) regulations, also known as TUPE, preserve employee contracts. Claims under TUPE may be made against a new company, for example, for constructive dismissal.
What if my company isn’t insolvent?
However, if your firm is not insolvent, this immediately boosts the likelihood of successfully selling your business. If your business is insolvent, the value of your company will naturally decline and attract a different calibre of purchasers. This increases the appeal of your company and the amount of potential customers who are likely to express interest.
A knowledgeable business transfer agent may provide insightful advice on how to sell a struggling company and how to increase sale value. To determine how much your distressed company is worth and how much you can realistically make from the sale of your business, the first step will be to conduct a business valuation. Even though it may be difficult, considering your company’s finances, selling a failing firm might offer the best odds of making money.
Frequently asked questions
Yes, you can sell a struggling business, although the process may differ from selling a profitable business. For one, a potential buyer will need to have a deeper understanding of why the business is failing. The enhanced due diligence may mean the process takes a little longer than it would, were the business in profit.
Yes, its legal to sell a company with debt, but in many situations this has to be done with the approval of an Insolvency Practitioner, either as part of an administration generally or as part of a pre-pack sale. Can you sell a struggling business?
Is it legal to sell a company with debt?
Conclusion
In conclusion, selling a financially distressed business requires careful consideration and proactive steps to navigate the challenges it presents. If you find yourself in such a situation, it is crucial to explore all available options and seek professional guidance to maximise the value of your business. To take the next step towards selling your distressed business, we encourage you to complete our online enquiry form.
By doing so, you will gain access to expert assistance and a network of potential buyers who specialize in acquiring distressed businesses. Embracing this opportunity can help you find a viable solution, minimise your losses, and embark on a new chapter with confidence. Take action today and complete our online enquiry form to begin the process of selling your financially distressed business.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.