Scope and size of the project:
50 FTE, revenue of approximately 80 MSEK, four months.

Challenge:
Reconstruction is a last resort to avoid bankruptcy. Less than half of initiated reconstructions are successful. A reconstruction means that old debts are frozen and cannot be paid while all new commitments must be paid in cash, meaning the company cannot take on new debts. Timing is critical as the government pays salaries through wage guarantee, freeing up liquidity initially.

Working in a reconstruction requires a proactive leadership. Meanwhile, the company is in a situation where everything moves slowly and new legally mandated processes are implemented by the bankruptcy administrator. Numerous questions from suppliers, customers, staff, unions, occupational health and safety, the press, and tax issues that need to be answered and handled. The leadership and the reconstructionist must together prepare a reconstruction plan that must be approved by the court. After a quarter, the extension of the reconstruction must be approved by the court.

Lesson:

Start by seeing if you can perform an out-of-court settlement instead of a reconstruction. Obtain external support for the process and try to reach an out-of-court settlement with your creditors. With the right support, there is a surprisingly high chance of success. Advantages: quickly resolved, discreet and incredibly cost-effective compared to a formal reconstruction.

If you end up in reconstruction, the capitalization must be in place, or almost in place at least. Obtain external resources that have done this before if possible and choose the right reconstructionist. Make sure the Board is "safe" by going through reconstruction or bankruptcy before the company incurs tax debts.

Contact us for a free initial review if you are considering reconstruction. We have the experience and network to provide you with advice so that you avoid the most common pitfalls. Due diligence not only involves the company in question and its parent company, but also the capital structure behind the parent company and the real owner.

Regardless of how good the team and products are, leave the project when your consultant invoices are not paid on time. During my time in Germany, I learned the winged expression:

Trust is good, control is better.