Entri AdminEntrihub chats to Robyn Hey, Founder of Robyn Hey Attorneys. Robyn talks about the costs and timelines for struggling businesses.
Question 1: How do costs in liquidation work?
Robyn: When you're looking at the cost of liquidation it always depends on what the asset base in the company is. Again, as I've said before it's really important that if you're going to liquidate you liquidate while there are still assets in the company, because those assets are sold and from the proceeds of the sale of those assets you're liquidated fees are paid. If there are insufficient assets in a business to cover the costs of liquidation then the business owners on the hook for all the costs. Those costs include legal fees, fees paid to sheriff's and newspapers for advertising a liquidation and then the actual costs of a liquidator him or herself.
Question 2: How do costs work in business rescue?
Robyn: Because of the structure of business rescue it's very important that if a business is placed into business rescue it is able to sustain the costs of a business rescue practitioner. So either you can get funding post business rescue or there are sufficient funds available from the business owners or from creditors or institutions that are willing to put money into the business in order to rescue it.
Question 3: How do costs work in turnaround?
Robyn: When you're dealing with a turnaround scenario then you will be paying fees to your turnaround experts. You'd probably pay a lawyer a business coach and accountant and you would agree a fee. Some people were kind of success fee basis so if certain targets are reached then then they get a fee and other people quote on an hourly basis. It's going to depend in every case on the experts that you approach.
Question 4: What are the timelines involved in these various options?
Robyn: Putting a business into liquidation can happen very quickly. It can be as quick as a couple of days or as long as three to six weeks. We advise our clients that once they've made a decision to liquidate that they act quickly because the longer you drag it up knowing you're going to liquidate the more you are exposed to any claims against you and your personal capacity as a business owner after liquidation. Once the liquidator is appointed he has to go through a process. He has to set up meetings with creditors, he has to get resolutions passed authorizing him or her to sell assets of the business. Ordinarily, under normal circumstances the assets of the business are not sold within the first six to eight weeks, unless there is a very excited buyer in the wings. The entire liquidation process after your liquidity is appointed is about 18 months. The business owners not expected to be involved on a daily basis after the first two to three months you basically fall out of the liquidation process and you maybe answer a couple of questions when a liquidator has them. Your business can be placed into business rescue within a couple of days or a couple of weeks depending on the circumstances. A business rescue practitioner has to be appointed very soon after that and the entire business rescue plan has to be presented within 25 days of the business rescue practitioner being appointed under most circumstances. The implementation of a business rescue plan is a variable it depends on the circumstances but it's not a drawn-out process as a rule. The idea of a business rescue is that somebody comes in deals with the business rescue plan puts it together implements it and gets out. If you decide to do a turnaround process for your business normally your timelines are a bit longer, because you don't have a set process that you're following and that will vary from business to business and practitioner to practitioner.