Receivership & Liquidation Advice

Companies in financial distress demand firm support from their bankers. However, bankers could support only up to a certain limit, providing time for the directors to under a proper corporate restructuring and debt rescheduling exercise.

The corporate restructuring exercise can take a mild form where new funds are injected by existing shareholders or new investors, by injecting new viable business that generate cashflow or by disposing some unnecessary assets to pay back the creditors.

If the debts are too severe, companies make take a drastic form to undertake a Section 176 scheme of arrangement and reconstruction exercise under the Companies Act by getting a Court protection for the time being while aggressively looking for a white knight to save the company by injecting cash and profitable business. Very often, such exercise will force existing creditors and shareholders to have a deep hair cut and write off as much as 60% to 90% of the original holdings in the company.

If this fails, creditors may want to place the company under receivership or at times, liquidation may appear to be the only option, despite the misconception that all companies in financial distress should be rescued!

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