When is informal negotiation an option for me?
If a company has insurmountable debts and if getting additional finance is not an option, the director could try to negotiate a settlement with the company’s creditors. We do a lot of negotiation work for our clients as part of our overall strategies.
What does informal negotiation mean?
The aim of informal negotiation is to negotiate a settlement with one or more creditors for less than the full amount of the debt. To demonstrate the company's ability to pay and negotiate the time needed to catch up on creditors, cashflow forecasts and other supporting documentation is usually prepared.
Our approach is to complete a detailed financial assessment of the company and identify what return would be available to creditors if they pursued legal action instead. While some creditors can be litigious, most are not. Most creditors would prefer not to have to incur the legal fees or go to court if they have a reasonable alternative.
The difference between informal and formal negotiations
The advantage of informal negotiation is that it is often considerably cheaper in terms of professional fees than formal negotiations (such as Debt Restructuring or Deed of Company Arrangement). The disadvantage is that sometimes it is necessary to have every creditor agree for the plan to be viable, and one hostile creditor can derail the whole process.