Безопасный выход из действующего проекта

How to safely withdraw from an ongoing project at the stage of bankruptcy

To know when to get out is a manifestation of supreme business wisdom worthy of admiration.  To notice the warning signs of project failure and limit potential losses is important, otherwise later you may be facing outsized losses or even graver repercussions.

For all possible scenarios there should be a rational and detailed plan, even for the most complex and emotionally charged situations. When you are feeling extremely overwhelmed, you may be unable to assess the situation objectively and you can’t think clearly. It is easier to control emotions if there is a precise plan that you can stick to.

Psychologists recommend to imagine the worst that might happen in order to overcome fear. After you’ve faced your fear, you need to take emotions out of the situation, return to here and now and make a plan for the worst-case scenario.

The hard truth is that not all business projects bring the desired outcomes

There are plenty of sayings and wisdom quotes by thought leaders such as ancient philosophers, famous entrepreneurs or popular business coaches.

Not all projects become successful but they can still give us a valuable and useful experience.

If you’re an entrepreneur yet you’ve never made a mistake, then you’re not really an entrepreneur (Richard Branson)

For the robust, an error is information; for the fragile, an error is an error (Nassim Nicholas Taleb )

It is important to know when to withdraw from a project, to finish it before it becomes too costly.

In 2013 we were hired to help with a purchase of a distressed company undergoing bankruptcy proceedings. The company in question had a  subsoil use license with proven and forecast reserves but the company did not engage in any extraction activities.

The senior lender was the group of investors that had previously purchased the right of claim against the company from the bank. The company owners were two physical persons who did not take part in the bankruptcy procedure.

After taking hold of the controlling share of debt, the group of investors were planning to conduct a replacement of the debtor’s assets and transfer the licence to a new company. There was another potential investor who thought that the entire amount of the company’s debt recorded in  the creditors’ register was significantly lower than the market value of the company’s shares.

Proposed strategy and results

We proposed to buy a block of shares from the owners  (the purchase took place at the final stage of the bankruptcy proceedings when the management’s powers were already terminated) and then discharge all the claims recorded in the creditors’ register through a third party’s statement in the bankruptcy case.

Thus, upon completion of the bankruptcy procedure, the potential investor would have owned the company’s shares and the controlling share of debt. After that, the investor would have been able either to keep the company and develop it at their own discretion or sell it to a larger stock investor. The sale of the company was expected to bring a large profit to the investor.

The potential investor bought the company’s shares and a part of debt, joined the bankruptcy proceedings, and bore substantial costs. The ensuing confrontation that unfolded during the bankruptcy proceedings resulted in litigation costs and other extra costs. The confrontation lasted for a year and as the proceedings continued, new disputes arose.

Eventually the potential investor decided to withdraw from the project and sold the company’s shares and  the right of claim to the adverse party.  The project lasted for a year and, thanks to our efforts, our client managed to break even and avoid any significant losses.

At the moment when the decision to withdraw was taken, it was yet unknown what would happen to the project, whether the company would find a buyer, and what would happen to its assets.

In a few years’ time we found out that the company’s license had been revoked and the project had never been realized.

“If something didn’t happen, it doesn’t mean that you weren’t lucky” (Wisdom saying)

Разрабатываем Стратегии для собственников бизнеса в целях оптимизации группы компаний, решения нестандартных задач и продажи активов. Оказываем услуги по сопровождению сделок M&A, управлению непрофильными активами и проектами в целом.

Leave a comment:

Legal Information
Apexcom Ltd.
Primary State Registration Number (OGRN) 1217700163746
Taxpayer Identification Number (INN) 7726475790
Tax Registration Reason Code (KPP) 772601001

+7 (495) 225-81-62

Address: 117105, Moscow, Novodanilovskaya Embankment 6, building 1, 10th floor

© 2021. All rights reserved. APEXCOM® Powered by Digital Agency GOadvance