My employer is in financial difficulty. What may happen now?
There are several possibilities that could occur, including (but not limited to):
Management may be able to turn the business around and negotiate with the various stakeholders in the business. The business after a period of struggling survives with the support of creditors, funders and employees;
A third party may purchase the business. This may involve the provision of additional finance and seek to turn the fortunes of the business around;
The business may obtain new finance, for example from the existing external funders, shareholders, new funders, directors, etc. This may provide sufficient time for the business to restructure and ultimately survive;
The business enters into an informal arrangement with its creditors and this allows the business to continue to trade;
The business enters into a formal arrangement with its creditors through a Voluntary Arrangement. This would provide breathing space for the business.
The funders of the business, e.g. the bank, could demand repayment of amounts outstanding and in the absence of the ability of the business to pay this the bank could appoint an Insolvency practitioner;
The trade creditors, HM Revenue and Customs or someone else owed money may petition for the winding up of the business. If this is successful the business will be placed into liquidation (if a company or partnership) or the proprietor made bankrupt (if an individual or partnership); or
The directors of the business may seek the appointment of an Insolvency Practitioner, e.g. Liquidator, Administrator or could invite the bank to appoint a Receiver.
Although it is possible that all of these scenarios have an impact upon the employees, it is likely that the latter 4 scenarios would have the biggest potential implications.
