An insight into advisory work during Lockdown

As of 20 March 2020, the general public in the UK were advised to stay at home whenever possible to fight the spread of Covid-19 by Prime Minister, Boris Johnson.

At Cowgills, we closed the offices and working from home became the new normal.  IT support became vital and the use of Microsoft Teams, Zoom Calls and merged voice calls all very quickly became common practise to ensure that support could continue to be offered to clients.

For an Insolvency Practitioner, meetings with accountants and advisors, company directors and management and company employees are all crucial to providing advice and support to businesses and to formulate and implement an appropriate strategy.

So during lockdown and without the ability to interact face to face, continuing to do business, was going to be a challenge; however, one we have managed to overcome by utilising the technology available and implementing a pragmatic mindset, whilst continuing to monitor the regular guidance and best practice that has been circulated during Lockdown by R3 and the IPA.

Here are two case studies where we’ve assisted to enable positive outcomes:

Case Study One – Members’ Voluntary Liquidation (“MVL”) (April 2020)

• The Company accountant contacted us to advise that his client has ceased trading and was looking to benefit from Entrepreneurs Relief via a ‘Capital’ distribution in an MVL.
• We liaised with the accountant to obtain all relevant company and financial information and arranged for the outstanding HMRC computations, returns and payments to be made so that the Balance Sheet included only cash.
• I held a video call with the company director and their accountant to provide an overview of the MVL process and how we would facilitate the distribution to the director, as he was also the sole shareholder. The video call enabled me to verify his identity to the photo ID that I’d received electronically to ensure that I had satisfied any anti-money laundering considerations.
• All appointment documentation was prepared and emailed to the director for him to print, sign and scan back to us (with original documents being posted) and we arranged for a solicitor locally to him to witness his statutory declaration on the ‘Declaration of Solvency’ whilst abiding by social distancing guidance.
• Shortly following this, the company entered into MVL, as we’d been provided with a deed of indemnity, we made the capital distribution to the shareholder to enable him to complete on purchase of a property.
• The feedback from the accountant and the director was extremely positive and eased by using the technology available and the speed in which we were able to act.

Case Study Two – Business Sale via Administration preserving all existing jobs

• The company, a fashion e-commerce business has been looking to raise funds over the last two years.
• However, as a result of a difficult trading period running up to lockdown and immediately thereafter (website traffic reduced from c10,000 sessions to under 1,000) and the significantly reduced income, meant that cash availability was insufficient
• The company undertook a financial modelling exercise which took into account the government support available and forecasted (reduced) income as a result of Covid-19 but, in each scenario, it was apparent that insolvency advice was required. Furthermore, a CCJ was received from a creditor.
• In mid-April, the Company formally engaged Cowgills to access the position and provide formal advice.
• Subsequent ‘meetings’ were held virtually, and it was established that the major value in the business was its intangible assets, comprising of the brand and Intellectual Property Rights.
• Utilising the expertise of independent valuation agents, information was gathered to very quickly market the ‘business’ for sale, whilst the company was protected from its creditors during a period of Moratorium.
• The business opportunity was marketed on Cowgills’ website, our agents’ website and via an electronic ‘mail shot’ to over 12,000 interested parties.
• During this process, we engaged with the secured lenders and provided them with a strategy that they were satisfied with. Again, the use of video conferencing and conference calls was paramount to this.
• Having received interest from several parties, negotiations ensued, and four offers were received; however, three of these were for only the assets of the business and did not include a transfer of the current workforce.
• One party did, however, make an offer for the business and assets which was inclusive of a transfer of the staff. This offer was the second highest in terms of the price paid, but it served to reduce creditor claims by transferring the employee liabilities and, importantly, it proposed to preserve all six jobs.  Accordingly, this offer was recommended by our agents and after agreement of a sales contract and, again, all discussions were undertaken remotely and using technology.
• A sale was completed in May, very shortly after our appointment as Administrators.
• By completing the sale, we demonstrated that despite not being able to meet face to face with the management and staff, we were able to utilise the technology available and our professional advisors, to maximise the outcome for creditors and preserve all employment.

If you would like any further information or advice, please do not hesitate to contact Nick directly: nick.brierley@cowgills.co.uk .