While virtually no sector has come out of the coronavirus crisis - and in particular the national lockdown – unscathed, those within the events and live performance industry have perhaps taken the brunt of the fallout.
When the lockdown was announced, businesses from a raft of sectors were forced to cease trading almost immediately, however the safety net provided by a range of government support schemes such as the Coronavirus Job Retention Scheme (CJRS) and the variety of loan packages on offer, went some way to keeping these businesses afloat during those unprecedented times.
As time has gone on and restrictions have been eased, those within leisure, retail, and hospitality have been allowed to reopen at various intervals allowing them to gradually work towards making up for lost time. However, those operating within the events industry are still left in a state of limbo, unable to recommence operations at any meaningful level. Caps on the number of wedding guests and wider restrictions on mass gatherings and social distancing guidance, has not just made it difficult, but virtually impossible for many within the events industry to survive.
This is a problem which is affecting limited companies, employees, self-employed individuals, and contractors across huge swathes of the entertainment and events sectors. From theaters, venues, and conference centres, through to actors and performers, caterers, cleaners, tour managers, riggers, wedding and events planners, the knock-on effect is vast.
With existing bookings being postponed or cancelled altogether; the widespread uncertainty as to what the future holds for both private and public mass social gatherings is preventing new bookings from being made. While those planning on a live event or social get together may be able to delay until the situation improves, for many companies who rely on organizing and hosting these events, time is rapidly running out.
If you are weighing up your options when it comes to potentially closing your events company, it is vital you understand of all of your options first, allowing you to make an informed decision as to the future of your business.
Depending on the financial health of your events business prior to the pandemic hitting, 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 be the case that the uncertainty surrounding future local lockdowns and continuing social distancing regulations, means the future for your events company looks beak and closing the company is the only way forward.
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.
With new bookings thin on the ground, events companies have seen their cash flow completely decimated as income dries up. In order to combat the effect of this unprecedented business disruption on companies across all sectors, various support measures were unveiled by the government at the start of the COVID-19 crisis.
These initiatives were designed to provide some short-term relief to businesses who were unable to trade, or had seen their ability to trade severely impaired as a result of the national lockdown restrictions.
The CJRS allowed bosses to furlough staff members for whom there was simply not enough work for them to do. A huge number of events and entertainment companies took advantage of this scheme in order to reduce overheads at a time of no income, while also providing a level of financial protection for their employees. The scheme was extended until the end of September 2021, givings events companies a level of security at least when it comes to being able to pay their employees.
Events companies are still able to take advantage of a government-backed loan through the Recovery Loan Scheme. Even companies which previously obtained borrowing through the Bounce Back Loan or the Coronavirus Business Interruption Loan Scheme (CBILS) can apply for a Recovery Loan. Used correctly, accessing borrowing through such a scheme may be exactly what your events business needs to immediately boost its cash flow and kickstart its recovery. However, as when taking out any form of finance, caution needs to be exercised. If your company is already heavily indebted, adding yet more borrowing is unlikely to provide the relief you are looking for.
Talking this through with an insolvency practitioner can help you see the bigger picture and fully understand what options you have. Committing to further borrowing could be a risky move if your events company is unlikely to be viable in the long-term. You have certain responsibilities as the director of an insolvent business and one of these is to ensure that you do not expose your existing creditors to further losses, including by taking out additional borrowing at the time of insolvency. Your insolvency practitioner will be able to provide the expert help, guidance, and support you need at this time.
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.
Even if the challenges posed by the coronavirus crisis 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.
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.
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.
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