“Better outcome” for the company, means an outcome that is better for the company than the immediate appointment of an Administrator, or Liquidator, of the company. In most cases the appointment of an Administrator or Liquidator of a company will result in the complete or substantial loss of the value of goodwill of a business and the realisation of assets for fire sale values only. Depending on what secured creditors exist and the business or assets of the company, Voluntary Administration or Liquidation will, therefore, result in a shortfall for secured creditors and no return to unsecured creditors at all.
The early evaluation of the company’s financial position and an assessment of the likely outcome of the Administration or Liquidation of the company are essential for maintaining Safe Harbour protection and assessing whether proposed courses of action are reasonably likely to lead to a better outcome.
However, as the outcome for a company and its creditors of Administration or Liquidation is often dire, any restructuring outcome that is likely to result in an improved return for creditors, whether by a turnaround or sale of business (and goodwill) or assets for market value (as opposed to a fire sale situation), will be a better outcome for the company.