Retail Insolvency Specialists
The retail industry is one of the most cut-throat industries in the world. The way consumers shop has changed, and will continue to do so, due to the growth of online shopping. Nowadays consumers flit between stores and online services making it a lot harder to make customers stick with you. With many discount codes and offers available online means even those who were once loyal to a certain business or brand are now moving around from business to business based on price. This in turn puts a strain on margins and hence profitability.
On top of all this hefty rent bills and other expenses such as wages and utilities lead to financial difficulty and ultimately why many stores fail. The recent changes to the national working wage of £7.20 per hour exacerbates the problem.
Whilst Insolvency legislation applies equally to all businesses, there are many different retail sectors with many different issues and challenges who need to be handled differently. This is why you need an Insolvency Practitioner like Gibson Hewitt who specialise in the retail sector who can ensure the right legislation is applied correctly to your business.
When a business has financial difficulties there are various alternatives available to you.
Liquidation The company ceases to trade with the assets being sold for the benefit of creditors. This is a terminal event for the company even if part or the whole of the business is sold it is usually a “fire sale”. All leases can be disclaimed.
Pre-pack administration The business is sold as a going concern immediately the company enters into Administration. There are significant legal hoops to go through in carrying out a pre-pack sale.
Administration The Administrators take on the operational role and ownership of the business and assets including financing the ongoing business whilst it is being offered for sale. The Administrator would trade the business whilst the business was offered for sale. The Administrator will have many of the same problems as the original management teams.
Company Voluntary Arrangement (CVA) A CVA is where a line is drawn on the liabilities of the company BUT the directors remain in day to day control of the company and the shareholders remain in ownership of the business and assets –The directors enter into a legally binding agreement between the company and its creditors monitored by a Licensed Insolvency Practitioner called a Supervisor. Such an agreement covers the quantum and timing of any payments to unsecured creditors and protects directors and is binding on all unsecured creditors if accepted by 75% of voting creditors. There are provisions allowing for the cost of redundancies to be made from the Redundancy Payment Office (RPO) which can allow companies to rationalise their staff. A benefit of this approach in the retail sector is negotiations can be entered into with landlords varying the rental payments which is often a significant costs in operating a retail business.
Gibson Hewitt are experts in putting CVA’s in place and making them work. It is the only true turnaround solution for all businesses. If you find your company has financial issues contact give Lynn Gibson BA(Econ) FCA FABRP MIPA IOD for a free consultation. We are Corporate Restructuring Advisory Firm 2016.