Even Keel Solutions recently worked with a pre-revenue company in the green industry facing financial difficulties. The company possessed valuable intellectual property but was struggling with mounting debts and insufficient funds to continue operations.
The Challenge
The company had reached a critical point where liquidation appeared imminent. However, the directors recognised the substantial value in their green technology intellectual property.
The main challenges included convincing creditors to wait for a potential IP sale rather than pushing for immediate liquidation, maintaining business continuity with limited resources, securing a fair valuation for the intellectual property in a distressed situation, and managing stakeholder expectations throughout an extended process.
Our Approach
Working closely with the directors, we developed a strategic plan to address these challenges head-on.
First, we conducted a thorough analysis of the company's financial position, identifying the burn rate and remaining funds. This gave us a clear timeline to work with and helped us understand exactly what we were dealing with.
Next, we established open communication channels with all creditors. We believe transparency is essential in these situations, so we provided regular updates about the potential for full payment through an IP sale. This helped build trust during a difficult period.
Through skilled negotiation with key stakeholders, we created the breathing space needed to pursue the IP sale properly. This wasn't easy—many creditors naturally wanted immediate action—but by demonstrating our expertise and maintaining regular communication, we secured their patience.
Rather than rushing into liquidation, we allowed sufficient time to attract appropriate buyers interested in the green technology. This strategic patience ultimately paid dividends for everyone involved.
The Outcome
Through this careful approach over a 10-month period, we achieved remarkable results.
All creditors received payment in full, which is relatively rare in distressed situations. Shareholders subsequently secured a substantial distribution through a solvent liquidation and the valuable green technology IP found a buyer who could continue its development. Most importantly, the company avoided an immediate insolvent liquidation that would not have produced returns for anyone involved.
Key Lessons
This case highlights several important lessons for businesses:
Early intervention is crucial. Seeking professional advice at the first signs of financial difficulty provides more options and better outcomes.
- Financial awareness matters, especially for pre-revenue companies. Understanding burn rate, costs, and available funds is essential for effective planning.
- Communication builds trust. Regular, transparent updates with creditors help maintain their support during challenging periods.
- Patience can pay dividends. Taking the time to secure the right outcome (10 months in this case) can dramatically improve results for all stakeholders.
- Realistic expectations are essential. Recognising the distressed nature of the situation allows for pragmatic decision-making.
Preventative Measures
Situations like this can sometimes be mitigated through earlier identification of the company's financial trajectory and a clearer understanding of the burn rate and available funding. Proactive engagement with potential buyers or investors before reaching a crisis point can result in more options, as can the establishment of strong financial controls and regular review processes.
By working closely with the directors and maintaining open communication with all creditors, we helped successfully turn what could have been a total loss into a situation where all parties benefited. This case demonstrates that with the right approach and expertise, even financially distressed companies can achieve positive outcomes.
About Even Keel Solutions
Even Keel Solutions is a leading insolvency practice specialising in supporting businesses through financial difficulties across the south of England. Our team of licensed insolvency practitioners brings decades of experience in helping companies and individuals find practical solutions to complex financial challenges, whether through informal arrangements or formal insolvency processes.
We pride ourselves on offering clear, practical advice with a focus on business rescue where possible, maintaining the highest standards of professional integrity whilst delivering straightforward guidance that business owners can trust and understand.
