What to do when bankruptcy seems inevitable

- Last updated on GMT

Related tags: Bankruptcy

On the way to the bankrupcy court, there is much that can be done to steer a business through a different course.One of the strategies promoted by...

On the way to the bankrupcy court, there is much that can be done to steer a business through a different course.

One of the strategies promoted by HW, which licensees may not always be aware of as an option, is the "voluntary arrangement".

This comes into play when a business is already insolvent - that is, it can't pay it's debts. Instead of letting things carry on in the hope of winning the lottery you can go through a formal legal process through which it is agreed that those debts are frozen and a scheme set up to pay them off.

Freed from the debts, the licensee has a chance to invest any extra profits made and turn the pub around, perhaps by introducing a new menu or getting on with that overdue refurb.

"The problem is that you really do have to find a way of generating additional profits," said John Hall. "The fundamentals of the business must change and you must really do something significant to turn it around."

Hall is so insistent on this point because, in order for the voluntary arrangement to be agreed, all the debtors must be happy that there is a good chance of the publican saving the business - and the guarantees of the insolvency practioner at the centre of negotiations is vital.

The expert accountant must oversee the changes and make his own best effort to make sure that they work.

In the licensee's favour is that the pub is worth much more as a going concern than as a shut-down building. If the debtors can be persuaded that, given time, the business can succeed, everyone can be a winner.

Related topics: Training

Follow us

Pub Trade Guides

View more