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Managing through the process of insolvency can be extremely challenging for any business, regardless of its size. The professionals at SOGID™ Management Consultants have decades of experience helping companies though the often unchartered path of insolvency. We work closely with our clients to not only manage relationships with creditors, but also navigate through the court system during the process.
One of our key strategic goals during insolvency proceedings is to identify value for all stakeholders involved. The team at SOGID™ is here to help our clients assess all options available to them.
There are critical insolvency services that SOGID™ Management Consultants can offer.
An assignment for the benefit of creditors, also known as ABC is a corporate liquidation tool that an insolvent company can utilize instead of formally declaring bankruptcy. The ABC process involves a financially troubled company transferring legal title of its assets and property to an authorized third party (assignee), who is then required to sell them and disperse any funds to creditors in a prearranged order of priority.
Under an assignment for the benefit of creditors arrangement, an assignee has the option of continuing to operate the business, should they decide to do so. This strategy often can increase the value of the company’s assets. A good example of this would be a manufacturing business who continues to operate, so that remaining raw materials can be transformed into finished products.An assignment for the benefit of creditors can be beneficial for distressed companies in a number of ways. Corporations can select the assignee of their choice and court involvement in the liquidation proceedings is usually minimal. In addition, the process is more expedient and less costly than other liquidation methods.
When it is apparent that a company can no longer move past its financial struggles, filing a Chapter 7 bankruptcy can be an effective method to wind down business operations. When an organization files for Chapter 7, upon court approval, the company’s assets (if any) will be liquidated. Depending on whether a business is established as a corporation, LLC or sole proprietorship, a Chapter 7 bankruptcy will have benefits and disadvantages for both owners and companies. Partnering with an experienced insolvency consulting firm can make the bankruptcy decision making process much more efficient.
Another bankruptcy option for businesses is Chapter 11. Unlike a Chapter 7, this form of bankruptcy allows a company to restructure its financial status through a reorganization strategy. This process is also subject to court approval. By lowering debt obligations and establishing revised creditor payment agreements, a Chapter 11 can be a great help toward keeping a business operational as it tries to get back to profitability. Chapter 11 laws also allow businesses to sell some of their assets and use those funds to pay creditors.
A receivership is an insolvency tool whereby a business is placed into the hands of another entity who is given custodial control of the company’s property and assets. In many cases, a receiver is put in place to protect the interests of a senior creditor when an organization cannot fulfill its debt obligations. The duties of a receiver can include continuing to operate a company with the goal of optimizing the value of its assets, controlling cash flow, selling the company to a third party or closing portions of the business that are deemed unprofitable.
When a company is on the brink of insolvency, it is a very stressful time for all stakeholders. Because every business has its own unique set of circumstances, it is vital that the right financial strategy be executed. Let the team at SOGID™ Management Consultants put our many years of knowledge and experience to work in helping your organization chart the best path forward when insolvency becomes an unavoidable circumstance.
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