Employee redundancies are a regrettable part of most insolvency proceedings. In many cases they are unavoidable as the company either cannot afford to keep employees on or do not need to due to closure.
However, through efforts made by administrators, some employees are able to keep their jobs or be placed in new ones by the acquiring company.
This has been the case for several UK companies within the last week. Here we will explore how administrators managed to save a combined total of 1,400 jobs by working with Lifeline Project and the Bolton Textiles Group.
Lifeline Project administration saves 1,300 jobs
The Lifeline Project was once a leading drug and alcohol treatment charity, supporting 80,000 people. However, it went into administration in May 2017 after suffering financial difficulties.
The administrators, FRP Advisory, stated: “During the last year, with further cuts to public expenditure budgets and some poorly funded projects, Lifeline had seen turnover drop and made a significant loss from its trading activities.”
This move into administration jeopardised over 1,300 jobs, but the administrators managed to salvage the situation by striking a deal with a similar charity, CGL (Change Grow Live).
The executive director at CGL, Mike Pattinson, claimed that no redundancies had been made "at this stage". This was a very beneficial and unexpected outcome for the employees of the Lifeline Project.
Administration saves over 100 jobs for Lancashire textile businesses
Administration can help companies in all sectors, as is evident from our next case study. These businesses may be different in industry, scale and location, but can still see the benefits of administration.
Jeremy Woodside and Chris Ratten, RSM Restructuring Advisory LLP were appointed joint administrators of four companies:
1. Cliq Designs Limited
2. J.H Cunliffe & Company Limited
3. Bolton Textiles Limited
4. Inhome Soft Furnishings Limited
All four companies were based in Bolton and Rochdale, and suffered losses due to challenging trading conditions.
The administrators oversaw the sale of the companies to Bolton Textiles (group) Limited, which was incorporated in April 2017. Joshua Dawson was named as sole director, and now the companies have begun trading once more.
Jeremy Woodside, RSM, said: “The deal saves a group of historic Lancashire manufacturers, which is not only great news for the 102 employees and the wider Lancashire economy, but it ensures continuity to the companies’ loyal customers.”
How administration affects employees
When a company becomes insolvent it ceases trading, usually resulting in numerous job losses. However, if the company goes into administration, there is a possibility that these jobs will be saved.
Going into administration places a moratorium around the company and stops all legal actions while the administrators try to sell the business and its assets, or restructure to create a viable company.
In both cases it is possible for employees to keep their jobs and maintain their employee rights, even if the company isn't trading at this time. However, this isn't always achieved, and sometimes employees make claims against the former employer.
If administration is successful, as it was for Project Lifeline and the companies rescued by Bolton Textiles, employees can continue to work in their roles, although possibly under a different company name, and in a slightly different position.
Administration can be a good option for both employees and employers, so is worth considering if your business is in financial distress.
If you are concerned about possible redundancies, get in touch with Company Rescue today.