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The business landscape is dynamic, and companies, regardless of their size or industry may encounter financial challenges that threaten their viability. In such circumstances, an examinership process can emerge as a crucial tool, offering a lifeline for distressed companies.
Benefits of undergoing an examinership process
1. Preservation of business continuity:
One of the primary benefits of examinership is the preservation of business continuity. Rather than succumbing to the immediate threat of liquidation, the examinership process provides a structured framework for the company to continue operations while addressing its financial challenges. This continuity is crucial for maintaining relationships with customers, suppliers, and employees, contributing to the long-term sustainability of the business.
2. Breathing space and legal protections:
Upon the initiation of the examinership process, the company is granted a moratorium, a legal breathing space that shields it from legal actions by creditors. This protection allows the company to focus on negotiating and implementing a restructuring plan without the immediate threat of legal proceedings. The moratorium provides essential time for careful consideration and strategic decision-making, offering a temporary shield against external pressures.
3. Debt restructuring and financial rehabilitation:
Examinership provides an opportunity for the company to engage in meaningful negotiations with creditors for the restructuring of debts. This may involve extending repayment terms, reducing debt amounts, or other arrangements that can alleviate the financial burden on the company. The focus is on achieving financial rehabilitation and positioning the business for sustainable growth.
4. Independent examiner's expertise:
The appointment of an independent and qualified examiner is a hallmark of the examinership process. This professional brings a fresh perspective and expertise to assess the company's financial situation objectively. The examiner works closely with the company's management to develop a viable scheme of arrangement, drawing on their experience to navigate the complexities of financial restructuring.
5. Employee protection and job preservation:
Examinership places a strong emphasis on employee protection. The process aims to preserve jobs to the greatest extent possible, recognising the importance of the workforce in the overall success of the business. The focus is on finding solutions that not only rescue the company but also safeguard the livelihoods of its employees.
6. Creditor approval and stakeholder consensus:
The proposed scheme of arrangement developed during examinership requires approval from a majority of creditors. This democratic process ensures that the restructuring plan is acceptable to the majority of stakeholders. Achieving creditor approval fosters a sense of consensus and collaboration, paving the way for the successful implementation of the scheme.
7. Controlled and transparent process:
Examinership provides a controlled and transparent process for addressing financial difficulties. The court oversight, involvement of an independent examiner, and the adherence to legal procedures contribute to the transparency of the process. This transparency builds trust among stakeholders and enhances the credibility of the company's efforts to overcome financial challenges.
Conclusion
The benefits of a company going through an examinership process are manifold. From preserving business continuity to debt restructuring, employee protection, and stakeholder consensus, examinership provides a strategic and structured approach to financial rehabilitation. It serves not only as a lifeline for distressed companies but also as a catalyst for their long-term sustainability and success in the competitive business environment.
