How to Save a Company from Financial Hardship After Covid-19

Covid-19 has had a big impact on many companies. A high percentage of them have great difficulties in continuing their activity after the economic stop during the alarm state. Is that your case?

If your company has financial problems, it is important to note that during 2020 it is not mandatory to submit the creditor contest. Great news! This will give you more leeway, without taking the risk of having to deal with the company’s debts, among other responsibilities.

During this year those companies with economic difficulties will have more time to study their viability, as well as to negotiate with suppliers and creditors the right formula to ensure their survival and growth. Although sometimes we see everything black, you can get ahead by pulling plan B, C… or D, if necessary.

In this regard, keep in mind the following:

1. Plan your finances

Now more than ever, plan your finances: develop a feasibility and financing plan as realistic as possible with the company’s situation. The heirs should know the importance of shareholder agreement as it sets out the shareholders rights and obligations.

Renegotiate with your suppliers, both the price and the payment terms stipulated before the alarm status. Circumstances have changed and we all have to take care of this new situation.

Negotiate with your creditors the payment of overdue debts: find a formula suitable for both parties, such as debt splitting, deferrals or forgiveness of a portion of the debt.

2. Make decisions

What to do if the feasibility plan indicates that your company is not viable, or you do not achieve the expected success with suppliers and/or creditor. 

If once the feasibility plan has been made you realize that the survival of the company is in danger, or you do not manage to close the agreements that you had envisaged with the suppliers and creditors, expert advises you not to further delayed decision-making. Doing so risks a barrage of claims being able to compromise the day-to-day business itself. 

3. Engage the service of corporate compliance

Another alternative is to hire the services of corporate compliance, these experts will keep your company well informed about the fines that you may encounter throughout the process. You can click here for Singapore Corporate compliance.

Consider these legal finance remedies:

In that case, you have several legal “remedies”. Let’s look at them:

  1. The “Extrajudicial Payment Agreement”, the purpose of which is to reach an agreement with creditors that allows us to overcome economic difficulties. By keeping the importance of shareholder agreement, one can easily regulate the selling of shares in the market.
  2. The “Pre-contest”, whose purpose is to renegotiate with creditors the terms of the debt at the court.

Depending on the circumstances of each organization, company service provider will recommend opting for one or the other option, without losing sight that the purpose of both is precisely to save as many companies as possible. The two options will facilitate the viability of the business, protect it from the embargoes of its creditors and allow you access to trading instruments that will give you oxygen to continue your activity.

 What happens if creditors’ agreements fail?

Negotiations with creditors may fail and you do not reach any agreement with them. In that case, it is advisable to present the appropriate creditor contest that allows you to:

  • Paralyze the embargoes.
  • Reach judicial agreements with creditors, through agreements protected by the Insolvency Administrators and the Court itself. You can protect your organization from violation of rules. 
  • Avoid taking on the company’s debts, as long as we file the insolvency application before any of the creditors.

We hope this post will guide you and help you make the best decisions for your company.

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