If the business is insolvent the directors fiduciary duty of care has to shift to acting in the best interests of creditors (not shareholders). Often the private equity investor is both member and creditor so this can create a conflict within the board.
What if the company you are an investor in is insolvent but you as members (shareholders) believe it can be viable if it can be restructured?
The best advice we can give any PE or business angel investor is to get rounded advice early. Of course you may decide to obtain advice from the big 10 insolvency firms, our view is that there are some very good and some not so good insolvency practitioners (IPs) employed by them all. However, in our experience, many of these IPs are driven by fees and exerting control - not by providing the BEST around solution.
KSA Group has extensive experience of restructuring heavily geared companies WITHOUT the use of administration, pre-pack or receivership. Using informal work-out or company voluntary arrangements (CVA) we can effect radical restructure of the cost base, close down factories or stores, exit large numbers of managers and employees rapidly and generally with nil cash cost.
Investments are not always lost and secured or unsecured debts can be restructured to be serviced out of free cashflow.
Keith Steven has worked for a number of VC / PE funds and was involved in setting up two private equity funds, that invested in distressed companies primarily using CVAs as the control technique.