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Working with Existing Advisors
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We work effectively and closely with existing advisers, not compete with themJohn was a partner in an independent accounting practice and had advised a wealthy family with a number of business interests for many years. One of the sons had acquired a loss-making luxury yacht manufacturer that had soaked up family funds since day one. Eventually the father had had to say enough was enough and the company looked like it would fail. This triggered the company's bank into demanding an independent business review from a national accounting firm that John considered a competitor. Receivership looked likely. John recognised that if this competitor were to be appointed, it would control the receivership work and the choice of advisors jealously. It would mean no future work for John. It would also mean some considerable disappointment for the family client, which wanted to be closely involved in sorting out the problem both because it was the largest creditor and also because it prided itself on its reputation. John came to see us with his client. We quickly spotted that receivership would mean a disorderly break up of the business with various creditors fighting for what assets remained on site. As a result, most creditors would not have received anything. The client felt, with good reason, that if trading stability could be recovered, the work in progress could be completed and an orderly disposal could take place of the business as a going concern, leading to better values for everyone. In addition, there were two outstanding pieces of litigation against delinquent customers for money owed for repair work that would have been adversely affected if trading ceased. We suggested a way that the family client could achieve this outcome by way of a CVA. This involved the family advancing ?250,000 to underwrite a prompt dividend to creditors of around 20%. Once recoveries were made, this money would be repaid and then further sums would be shared equally between the family and the creditors, which benefited the other creditors since the family represented about 75% of the liabilities. We took this plan to the bank, which agreed to continue the overdraft facility. The creditors approved the CVA. The family duly settled the litigation satisfactorily and arranged for a disposal of the business once profitability was restored for an excellent price. These steps eventually resulted in a 50% dividend for creditors, which was unanimously applauded as a good result. Throughout this process, which in the end took three years to find the best buyer, John and the company's existing solicitors closely helped the company with the litigation and sale process, in addition to on-going work such as audit and debt collection. John was able to generate significant further fees in addition to having a satisfactory client. We focused on implementing the CVA, which was a worthwhile case for us, and did not seek to take away work that was more appropriate for John to do. At the end of the day, we value John's future referrals and do not take a short-sighted view.
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This document explains the relevant position only in general terms. We do not intend it to be used as formal advice about a specific situation, for which you should consult with a qualified insolvency practitioner and not rely upon this document. Portland would be pleased to advise you formally and you should contact one of the directors listed to arrange this. Portland regrets it is unable to accept any responsibility to anybody who seeks to rely on this document. |
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