Sunday, Oct 14, 2018 at 12:18
I think the biggest surprises, when companies go into VA, are usually the surprises to the poor old trade creditors - who are often unaware how deep in the manure, the company has been - and for how long.
The general trend by sharp administrators is to make the long-suffering trade creditors take a major share of the current companys losses - while the administrators "resurrect" the company in a new corporate structure, that owes nothing to creditors of the old company structure.
The administrators then offer a huge carrot to the trade creditors to take the financial kick in the goolies - on the basis that they'll be able to make up their losses, by supplying and trading with the new company structure.
9 times out of 10, the new company structure is dependent on huge outside financial contributions and support - but those contributions and support usually come with all kinds of caveats - including making the new financial contributor a preferred creditor above anyone else, if the new company structure fails, as it often does.
The simple problems with most businesses that fall into administration, is the inability to manage costs, the inability to see and manage for downturns in the market - and the inability of the owners to reduce their millionaire lifestyle expenditures, when economic downturns do occur.
The cheap Chinese import problem will always be with us, a wise manufacturer goes to great lengths to explain the folly of buying cheap.
"Buy Cheap - Buy Twice", always used to be a good explanation of that point - which point, many people seem to have forgotten about.
Cheers, Ron.
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