A turbulent 2020 has given way to continued economic uncertainty in 2021, leaving the technology and media sector facing significant challenges to their financial wellbeing and future solvency.
A future that could seriously be at risk if company directors aren’t proactive in obtaining professional insolvency advice and guidance on how to proceed in these unprecedented circumstances.
Companies unable to pivot quickly in such a fast-paced environment as technology and media may face insolvency and potential liquidation. So what are some of the problems being experienced by the sector, and is there anything you can do to save, and then future-proof, your business?
Technology has been at the heart of the extremely successful work-from-home revolution – a movement that had begun pre-pandemic, and that quickly offered the vital alternative we needed to ‘traditional’ office working.
From a health perspective, when the pandemic hit, there was an absolute necessity for video calling, online education, and a digital healthcare capability. This requirement enabled some tech businesses to thrive as they met this sudden and unexpected demand.
Others, however, lacked the available capital sums needed to invest, and were unable to keep pace with their rivals. Some of these businesses now face significant financial issues, and an uncertain future.
Media companies in financial distress
Media companies face considerable challenges in the face of misinformation, political disunity, and proclamations of ‘fake news.’ Being able to report impartially, without threat or fear of intimidation, also appears to be an increasingly elusive ideal around the world.
The overcrowded media marketplace and sheer number of companies competing for attention also makes it difficult for individual businesses to stand out. A distinctive brand and core audience could help to improve their financial situation, but this takes time to develop.
A further challenge for the sector is the power of social media - its ability as a whole to divert people from the facts through sheer noise or confusion, and negatively influence situations through the weight of peer pressure.
Cyber security is an additional challenge that media companies can’t afford to ignore. They must protect customers and consumers, as well as their high value content assets. Putting in place effective protective measures comes at a significant cost, however.
So where does this leave the technology and media sector in terms of business survival?
Understanding liquidation of technology and media businesses
Creditors’ Voluntary Liquidation, or CVL, is a formal process for businesses unable to recover their financial footing. It protects creditor interests by minimising losses, and ensures you also fulfil your legal duties as a director.
On a positive note, it may be possible to claim redundancy pay as a director when you enter liquidation. The current average claim for director redundancy is £9,000, and we can put you in touch with a fully regulated, trustworthy claim firm to find out more.
During CVL, your company assets are sold at a liquidation auction, and the proceeds used to pay back creditors in the statutory order. Unfortunately, this process results in the loss of all jobs, but eligible employees can also claim redundancy pay and other entitlements.
Begbies Traynor Group are company liquidation specialists, and can provide further advice tailored to your own tech or media company. A broad range of robust rescue programmes exist in the UK for businesses facing insolvency and potential liquidation, however, so could your technology or media company be rescued?
Rescue my technology or media company
Company Voluntary Arrangement (CVA)
It may be possible to restructure your company’s debts within a Company Voluntary Arrangement. This is an official agreement that protects viable companies from liquidation and closure.
If you’re eligible, the business can make a single monthly payment that’s distributed amongst creditors in the pre-agreed proportions. This provides your company with some certainty in relation to budgeting and cash flow. Additionally, all interest and charges are frozen.
CVAs typically last between three and five years, and directors regain control once the agreement is in place. Creditors must sanction the arrangement initially, however, with 75% (by value of debt) being required to vote in favour.
UK Liquidator’s expert team has extensive experience of negotiating with creditors, both formally and informally, and this may be all you need to turn your company’s fortunes around.
If creditors are intent on closing the company down because of its debt situation, entering company administration stops any existing or intended legal action. Once a winding up petition is granted, it can be difficult to save a business from liquidation given the short timescales for action to be taken.
When a company enters administration, it’s protected for eight weeks by a statutory moratorium on creditor action. This allows the appointed administrator time to assess the company’s needs and take the necessary steps. These could involve restructuring debt, for example, or in some cases a business sale may be possible.
Sell my tech or media business
A process called pre pack administration enables underlying business assets to be sold, either to third party buyers, or sometimes to the directors of the ailing company. This sale is carried out via the liquidator, who ensures the assets are professionally valued.
Pre-pack administration must provide creditors with a better return than other insolvency routes, and can offer a positive outcome following a period of deep financial uncertainty within a business.
A further benefit of pre pack administration is that jobs are saved. TUPE legislation, the Transfer of Undertakings (Protection of Employment) regulations, safeguards employment contracts as staff transfer from one employer to another.
Although rescue is always our principal goal, it may be that your technology or media company simply cannot be turned around, and that liquidation is the only choice. In either scenario our partner-led team of licensed insolvency practitioners are here to help.
Begbies Traynor Group offer same-day consultations free-of-charge, so please get in touch – we work from a broad network of offices throughout the UK, so you’re never far away from professional advice.