Going concern v Break up basis

Going concern v Break up basis

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My client runs a restaurant which is failing.  Money is running short now and the directors are reaching a point where they can no longer bail the company out.

The 31/03/14 accounts are still to be signed and submitted.  The directors can no longer say that they can fund the business for a further 12 months.  They want a way out... soon!. The business is up for sale but there is little interest.

They may stop trading and try to buy out  the lease.  They may still find a buyer. They could continue with much reduced opening hours to try to cover the rent.

What do I do re the accounts?  The directors don't want to sign a letter of continuing support for the next 12 mths

Should I now be passing this to a recovery specialist?

Many thanks

Replies (4)

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By thomas
11th Dec 2014 10:52

anyone had experience of this?

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By johngroganjga
11th Dec 2014 10:57

What difference does a letter of continuing support make?  I am assuming you are not auditing the accounts.

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By Democratus
11th Dec 2014 11:00

You have the answer already

If there is no possibility of the company reasonably surviving 12 months +1 day from the date the accounts are signed then the accounts need to be done on a break up basis.

The directors should make the decision on the involvement of a recovery specialist or administrator, not you. They also need to ensure that they have treated all creditors equally.

Thanks (1)
RLI
By lionofludesch
11th Dec 2014 11:24

Wrong heading

@Thomas

The thread heading is misleading - it suggests that you're after comments on how to prepare accounts.  The query itself, however, is clear that you're seeking advice on whether to pass the case to an insolvency practitioner.

You may not be at that stage yet but, obviously, the directors need to keep that in mind if the assets continue to decline and the point comes where they cannot settle their debts.

As far as the accounts go - break up basis. Although, in practice, there might be little difference other than revaluing the fixed assets (tangible and intangible) at their potential sale value.

Thanks (1)