Buying back the business
If the business is likely to or has entered into an insolvency procedure then this presents an opportunity for management to buy the business back.
A business purchased out of insolvency will leave many of the liabilities behind (some employee liabilities will transfer over) thus giving the new owner a fresh start.
It may be possible, depending upon the particular circumstances to negotiate and agree a sale in principal prior to the business being placed into the insolvency procedure through what is known as a pre-pack. In other scenarios the management team have the advantage over other interested parties of the knowledge of the business and its market.
Directors do need to be careful when looking to buy failed businesses or if they plan to set up a new business. There are laws to protect the public against phoenix companies and there are restrictions on the re-use of a company's name. Directors would be urged to seek professional legal advice prior to entering into a transaction or setting up a new business following the failure of company they have been involved in.
For more information on buying distressed businesses please refer to the buying section of this website.
