The coronavirus pandemic continues to batter the arts and entertainment industry due to lockdown and social distancing measures, leading to mass venue shutdowns for the indefinite future, pushing countless theatres and cinemas towards breaking point. As live theatre performances are curtailed due to social distancing measures and highly anticipated blockbuster films due for imminent release are temporarily suspended, many of the UK’s key creative industries face a battle for survival.
The cinema industry is experiencing extreme disruption following the cancelled release of anticipated high-grossing movies, instrumental to the success of cinema chains and independent movie theatres across the country. Much awaited blockbuster films are launching virtual opening nights through global streaming services or are facing lengthy postponements.
The live theatre industry is made up of an extensive list of contractors, freelancers, cast and crew members supporting each performance and breathing life onto the stage. The sector drives innovation and supports the work of countless creative individuals, from artistic directors, theatre managers to box office staff. According to Arts Council England, the arts and culture industry contributes £10.8 billion to the economy and supports over 350,000 jobs per year.
Theatres are adapting to Covid-19 by digitising live performances, marking the rise of streamed theatre, however, this falls short of compensating for the high running costs associated with live theatre and viewer appreciation for detailed stage aesthetics. As jobs disappear overnight following mass venue closures, Covid-19 has paralysed the creative arts industry.
In response to the coronavirus pandemic, the government unveiled a £30m support package for independent cinemas, and a minute fraction of the £1.57bn Culture Recovery Fund for theatres. The business rates holiday offers breathing space to struggling theatres and cinemas, in addition to eviction protection following the moratorium on lease forfeiture and debt recovery enforcement until the end of 2020. The Coronavirus Job Retention Scheme (CJRS) is helping to keep employees in jobs during this uncertain period of trading.
As cinema and theatre company directors continue to tackle mounting financial liabilities or risk closing their doors permanently, you may consider exploring liquidation options.
A Creditor’s Voluntary Liquidation (CVL) is a formal insolvency procedure administered by a licensed insolvency practitioner, resulting in the closure of an insolvent business. If your theatre or cinema has no realistic prospects of survival, a CVL can help provide an exit path while ensuring outstanding creditors are treated fairly.
The CVL process involves appointing a licensed insolvency practitioner who will be responsible for directing the procedure. This route can only be entered upon recommendation of an insolvency practitioner and following agreement from directors and shareholders. Creditors will be notified of your intention to wind up your theatre or cinema and presented with a report summarising the financial position of your business. The liquidation process will commence, resulting in realising asset value to repay creditors in a prescribed order, as set out in the Insolvency Act 1986.
Our licensed insolvency practitioners will review the health of your business and advise on the best route forward, which may involve liquidation, or else an alternative process aimed at rescuing the business, such as Company Administration, a Company Voluntary Arrangement or alternative finance options. We can guide you through the business recovery or closure process, offering a free consultation with our business rescue experts.
In response to the coronavirus pandemic which continues to cause damage to businesses across the entertainment sector, the government announced an emergency package to assist businesses. As previously strong performing theatres and cinemas experience financial distress due to drops in consumer demand following government trading restrictions and social distancing measures, both young and veteran businesses are feeling the brunt of the pandemic, forced to use urgent financial support to stay in business.
The Bounce Back Loan Scheme (BBLS) provides a government-backed loan to SMEs struggling due to Covid-19, worth up to 20% of their turnover with a maximum loan amount of £50,000. The scheme allows businesses to access finance at a faster rate to help support company cash flow. It has a variety of appealing features, such as interest payable after 12 months, no attached fees, no personal guarantee agreements and a ten-year loan term.
The Coronavirus Business Interruption Loan Scheme (CBILS) offers government-backed finance to larger SMEs impacted by Covid-19. To qualify for a CBILS loan, your theatre or cinema must have an annual turnover of up to £45m, illustrate business viability pre-Covid-19 and show how the pandemic has hampered the financial health of your business.
To protect jobs and reduce the likelihood of a surge in unemployment, the government introduced the Coronavirus Job Retention Scheme (CJRS) which allows employers to furlough staff, i.e. grant temporary leave to employees, relieving them of employment duties due to lack of consumer demand while remaining on the payroll. The CJRS has been extended multiple times and is now due to continue until to March 2021.
If your business requires a cash injection to maintain financial commitments, preserve jobs and ensure business continuity, accessing finance may be the ideal solution for your theatre or cinema. It is vital to ensure that your business can withstand upcoming periods of trading instability and realistically afford repayments, as failing to do so could result in the deterioration of your business, gradually leading to compulsory closure. As business loans become more accessible and the available loan value increases, theatres and cinemas are at risk of being loaded with insurmountable amounts of debt which could delay inevitable company closure.
Founded in 1920, Sarah owned an independent cinema located in a central setting popular with young cinemagoers. The business screened a range of contemporary and classic films, locally-funded productions and independent movies. Sarah’s business also supplied lighting services to some of the UK’s largest touring theatre venues.
The coronavirus lockdown hit three weeks before the opening night for a theatre performance which commissioned Sarah’s business to install lighting for one matinee and one evening performance each day, spanning 3 months. This marked Sarah’s highest value contract for the year which required specialist equipment obtained under a hire purchase agreement.
Her business accumulated debts to multiple creditors, including £230k to suppliers, £48k to HMRC, £22k overdraft and 3 hire purchase agreements worth a combined £65k. The business owned a freehold warehouse, a wide range of state-of-the-art lighting and screening equipment and showcased a strong historic track record.
Sarah contacted Real Business Rescue and shared her desire to continue ownership of her lighting business following a simple restructuring process which included a Time to Pay arrangement with HMRC to restructure tax liabilities. She decided to sell her cinema to an interested buyer as a going concern to focus on her lighting business and to generate funds to repay company debts.
As an alternative to company liquidation, you may consider selling your distressed theatre or cinema to an interested party. A licensed insolvency practitioner can direct you down the path of selling your entertainment business, providing an overview on how to calculate company value and the routes available to market your business for sale.
We will arrange a free valuation of your theatre or cinema business to determine how much it is worth, an estimated asking price and the value of company assets. A business valuation can help plan for life after Covid-19 and the long-term future of your theatre or cinema business, venue and employees.
The sale process consists of preparing your business for sale which includes reviewing your financial affairs, streamlining business operations and compiling the relevant reports. We can guide you through this process, review the financial health of your business and equip you with the required information which can prove useful when negotiating with prospective buyers.
Selling your theatre or cinema during Covid-19 may appear challenging, however, determined and proceedable buyers with an active interest in the entertainment industry continue to scout the market for their next business venture. We understand that selling a theatre or cinema in financial distress may be a tiresome task as the market for financially redundant businesses is niche. Our licensed insolvency practitioners can help determine if your business has enough value to undergo the sale process or if you should explore a company rescue strategy. We can assess your financial position and advise on the best solution to help bring about recovery or alternatively ensure an orderly winding down of the business and its operations.
Your appointed licensed insolvency practitioner will conduct a free business review to ascertain if your theatre or cinema can be rescued through a company restructuring procedure. Seeking advice early can help increase the number of options available to you.
If your business can realistically recover from the adverse financial impact currently experienced due to Covid-19, a Company Voluntary Arrangement (CVA) can help provide the necessary legroom. A CVA is a formal insolvency procedure administered by a licensed insolvency practitioner which enables you to renegotiate payment terms with creditors, cutting down payments into affordable instalments. This process typically allows you to spread payments across 3-5 years, subject to creditor agreement, providing you with the financial breathing space to repay creditor debts over a longer period.
A Fast-Track CVA is a compressed version of a traditional Company Voluntary Arrangement, designed to get your business back on track and deliver a speedy recovery in as little as six weeks. This process may be worthwhile for theatres and cinemas forced to close their doors due to the economic uncertainty surrounding Covid-19 and the associated trading restrictions, helping keep venues afloat until normal trading conditions return.
If you are keen to avoid liquidation as your theatre or cinema has significant asset value, company administration can help protect your business from legal action while a licensed insolvency practitioner directs business recovery. The role of the insolvency practitioner will be to act as the administrator, overseeing company finances and assets with the view to generate creditor returns. Company administration can help shield your business against compulsory liquidation and preserve business viability.
Your theatre or cinema business may be struggling to adhere to its liabilities and financial commitments due to restricted cash flow. If a cash injection can help bring your business back on track, secure customers and generate more demand, commercial finance may be your answer. We work closely with leading finance lenders offering competitive rates, paving a direct route to a range of products for your theatre or cinema. Our dedicated finance team can source a selection of company finance solutions, such as invoice finance, asset finance or a business loan to improve company cash flow.
Emergency Covid-19 loans and sector-specific grants launched by the government may also help bridge the income gap and help your theatre or cinema survive during the coronavirus pandemic.
It is a common misconception that company directors are unable to claim redundancy, however, this is untrue. As with any other eligible employee of your theatre or cinema business, you may be entitled to redundancy pay. Claims are submitted through the Redundancy Payments Service (RPS) and payments are made through the National Insurance Fund which is set aside for statutory payments, such as redundancy pay, holiday pay, notice pay and unpaid wages.
Director redundancy can only be claimed if your theatre or cinema enters administration or an insolvent liquidation process as you no longer have the necessary financial backing to continue trading. You can start your claim for director redundancy pre-liquidation; however, you must do this within 12 months of entering the company liquidation process. To claim director redundancy, you must be able to prove that you were an employee of your theatre or cinema for a minimum of two years, working at least 16 hours per week and paid through PAYE.
At Real Business Rescue, your licensed insolvency practitioner can refer you to a fully regulated claims management firm. Your redundancy claim advisor will calculate your director redundancy payment, for which the average claim is £9,000 as well as any other statutory payments you may be entitled to.
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