Advice for owners of events companies

Rescue, Recovery, and Closure Options for Events Companies

The events industry has had a torrid time over the past few years, with the Covid-19 pandemic meaning many business in the sector were simply unable to operate at any meaningful level for an extended period of time due to various lockdown and local restrictions on trade.

Although these restrictions are no longer impinging on business activity, the long-term effects on cash flow cannot be underestimated. For many, borrowing taken out during periods of subdued trade will become more and more onerous as everyday running costs continue to increase.

If you are weighing up your options when it comes to the future of your events company, it is vital you understand of all of your options first, allowing you to make an informed decision based on facts rather than guesswork.

Depending on the current financial health of your events business, as well as the long-term viability of the company, you may be able to consider one of the possible rescue and recovery strategies which may allow you to restructure your existing debt, simplify the company’s operational or financial structure, or source vital funding.

However, it may unfortunately be the case that the company's liabilities are simply too high to sustain. In this instance, options for closing the company may need to be explored.

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Liquidate my events company

Closing an insolvent company is done through a Creditors’ Voluntary Liquidation – or CVL. This is a formal insolvency process which is initiated by the company’s directors and/or shareholders in order to bring an insolvent company to an orderly end. A CVL can only be entered into under the guidance of a licensed insolvency practitioner who will, once appointed, facilitate the whole process.

One of the insolvency practitioner’s jobs will be to identify all company assets, including property, machinery, vehicles, and stock, which will be independently valued prior to being sold. Proceeds will then be distributed amongst outstanding company creditors according to a designated order of priority. Any debt remaining after the company has been liquidated will die with the company unless any of this borrowing has been personally guaranteed by the directors.

While placing your events company into liquidation is not a step you are likely to be keen to take, you have a legal responsibility to put the interests of your creditors above those of yourself and your business once you know your company to be insolvent. By opting for liquidation, you are facilitating the company being closed down in the correct manner while protecting your existing creditors from suffering further unnecessary losses.

If you are experiencing financial distress with your company and are weighing up whether closing your live events and entertainment business through liquidation is the best step, seeking advice from a licensed insolvency practitioner at the earliest available opportunity can help clarify the situation and ensure you are making the right decision for all concerned.

An insolvency practitioner will be able to talk you through your options – including closing your events company through a liquidation process – and help you understand what this means for your business, your employees, and also those your company owes money to.

If you believe your company has a good chance of bouncing back to profitability, your appointed insolvency practitioner will also take you through the options for turning around your entertainment business’s current situation utilizing a formal restructuring method.

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How we helped Marie’s wedding planning business

Over the past 12 years, Marie’s wedding planning business had grown in both size and scale. From a standing start, the business had grown to having 16 employees as well as offering a comprehensive range of services which had expanded from simply the planning and coordination of weddings, to having its own in-house catering team and marquee hire. The company had also branched out into planning engagement dinners and corporate functions.

Business was going well until the Covid-19 pandemic hit, which saw Marie having to postpone many existing bookings and cancel some altogether. While the Coronavirus Job Retention Scheme allowed all 16 employees to be furloughed, income was at an all-time low and the future for the business was uncertain. While limits to the number of guests permitted had considerably reduced enquiries as well as changing the scale of the weddings being planned, bookings were still being made for those opting for smaller ceremonies.

The owner got in touch with Real Business Rescue in order to discuss what could be done to save the business and protect its long-term position.

While the company was seeing losses in some areas, the core services offered by the business were strong and were still generating enough revenue to see a profit. The company went through a process of business simplification, which involved streamlining its operations and paring down the services. Unprofitable areas of the company were closed down, allowing for valuable time, money, and resources, to be directed towards the parts of the business that were still generating revenue.

Unfortunately, some members of staff were made redundant, however, some jobs were able to be saved. With a more streamlined business and reduced overheads to reflect the currently challenging climate, the company is able to continue trading and is in the best position possible to seize the opportunities when restrictions are lifted further.

Sell my events business

Even if the challenges posed within the industry has led to you wanting to walk away from your events business, there may still be the possibility you could sell the business to a third-party buyer.

It goes without saying that not all events companies will be saleable, however, depending on the reputation of your business and the assets it has, there may be someone keen on acquiring it from you. By putting your events business up for sale  not only could you receive the proceeds, but this may also allow the business to continue trading and for current employees to be transferred over to the new owners.

It may be that only certain elements of the company are saleable, such as certain core service offerings, its website, or the venue itself, rather than you being able to find a buyer for the entire business as a going concern.

Selling an events company can be tricky, particularly in the current climate. We have a specialist team of corporate finance experts who can be on hand to guide you through the process. By working together with you and your fellow directors and shareholders, we can determine whether a sale is possible, and if so, the form this sale is likely to take.

We will utilize our network of investor contacts to secure you a buyer who is proceedable and committed to the sale. We will be on hand at every stage of the sale from the initial valuation, throughout the pivotal due diligence process, ending only once the transaction completes.

Rescue my events business

A struggling business does not necessarily mean that the business is destined to fail. If your events business is currently fighting to stay afloat against rising costs and decreased income, there is still the chance the business can be saved.

Business turnaround is not a one size fits all process. Every company – whether in the events industry or not – is individual and the pressures it is facing will be unique to that business. This means a tailored approach is required to ensure the company is given the best possible chance of future success.

Restructuring an events company may involve engaging in a process of negotiation with creditors which can help to not only reduce monthly costs going forward, but also minimize the current pressures and demands for payment being placed upon your business. This may be done informally, or via a Company Voluntary Arrangement (CVA), a legally-binding insolvency procedure.

If this is not possible, entering the company into a formal insolvency process such as administration could be the lifeline your business needs. Upon being placed in administration, the company is protected by a moratorium which prevents creditors from beginning legal action against the company. Any existing litigation is also temporarily paused. This gives the appointed insolvency practitioner the time to form a plan free from threats of winding up. 

When it comes to implementing a turnaround strategy, the key is viability. That means your business must have the potential for success both now and also in the long-term. The business must be generating revenue, even if this is at a lower rate than previous levels. It is this income which can be used to instill confidence from your creditors and facilitate a turnaround

In the case of a CVA, for example, creditors will be asked to vote on the proposed terms before the agreement is allowed to go ahead. A minimum of 75% of creditors (by value) must give their consent to the arrangement and proposed repayment amount. In order for this to happen, creditors must be confident that the company has a good chance of adhering to the CVA for its duration. With a typical CVA running for 3-5 years, being able to convince creditors of your long-term viability is key to having the proposal accepted.

A new rescue process comes in the form of a Fast-Track CVA which has been designed as a response to the acute challenges being faced by small businesses in the wake of COVID-19. A Fast-Track CVA functions as an accelerated version of the standard CVA process, which involves just 6-8 weeks of involvement by the insolvency practitioner, although creditor repayments will be structured to carry on past this point. For those that are eligible for the process, a Fast-Track CVA can get your events company back on its feet in a way that minimizes time, cost, and disruption when compared to a typical CVA.

In some cases, the company may be experiencing cash flow constraints as a result of the enforced closure period during lockdown. If business has rebounded to levels consistent with income from pre-COVID times, it may be that a cash injection is all that is needed to reinvigorate the business and allow for overheads to be paid as and when they fall due.

We have an in-house team of commercial finance experts who can work alongside you to source the funding you need. We are able to harness our relationships with a variety of high street and alternative lenders to secure the most appropriate funding channel at a competitive rate.

Director redundancy for limited companies in the events industry

If you are operating your events business through a limited company, as well as being a director, there is a good chance that you also have employee status. In order to be classed as an employee there are certain criteria which must be met including working for your events company for a minimum of two years for at least 16 hours per week, as well as being paid a regular salary through PAYE.

If you are an employee of your company, did you know that you may be entitled to a redundancy payment if your company becomes insolvent and enters a formal liquidation process?

Redundancy for directors works in much the same way as it does for employees. The amount you could receive will depend on a number of variables including how long you have worked for your events company, your age at the time of liquidation, and the salary you took from the business. Additional statutory entitlements for arrears of wages, unpaid holiday, and notice pay can also be claimed although these will be subject to tax at your usual rate.

As part of the liquidation process, your appointed insolvency practitioner will be able to refer you to a fully regulated claims management firm who can help you claim the money you are entitled to.