Restructuring Jérémy’s business

THE SITUATION

At just 23, Jérémy is a rising star in the hairdressing world. After winning a reality TV competition, he opened his first barbershop in Old Quebec. It was an instant success: demand quickly outstripped his capacity. Encouraged by his entourage, he opened a second branch in Sainte-Foy – another immediate success.

Word of mouth gets around. Real estate owners ask him to occupy their premises. Before he knew it, Jérémy found himself at the head of a company operating eight branches in the greater Quebec City area.

But one of them – the largest and most costly to run – soon ran into difficulties. Its heavy losses were absorbed by the profits of the other branches. A year later, the financial difficulties were serious: his banker was talking about transferring his file to special accounts, rents were falling behind, lease termination notices were arriving, and Marc-André was even starting to delay his GST-QST payments. Completely discouraged by the situation, he has the good sense to consult an advisor at BRESSE.

The objectives

– Saving the company rather than closing it;

– Divest the loss-making branch that was threatening the whole business;

– Retain profitable branches and settle with creditors.

The solution

Jérémy expected to have to close everything. He was astonished to learn from Martin, his advisor at BRESSE, that a restructuring process – the notice of intent to make a proposal – made it possible to terminate a commercial lease that was undermining the company’s viability, while retaining profitable sites. This was the key to saving the company and returning to financial equilibrium.

With Martin’s assistance, Jérémy files a proposal. A notice of termination is sent to the landlord of the problematic branch, and a proposal is prepared for all his other creditors. This legal protection stops the pressure immediately: the notices of termination, collection proceedings and appeals stop as soon as the proposal is filed.

Martin takes care of everything: communicating with the landlord of the closed branch, negotiating with creditors, structuring a realistic offer and coordinating the procedure with the Office of the Superintendent of Bankruptcy. As a result, Jérémy can concentrate on what he does best – running his profitable salons and regaining control of his business.

The result

Given the seriousness of the approach, the creditors agreed to a compromise which enabled Jérémy to regularize his financial situation and return to equilibrium. The loss-making branch is closed cleanly, its lease terminated as part of the restructuring. The other seven branches – all profitable – continue to operate without interruption.

A year later, Jérémy looks back on the situation. Without this procedure, he says, he would have lost everything. Today, he is a fully-fledged craftsman and businessman once again, at the head of a company that is not only profitable, but thriving.

He is deeply grateful to his professional for guiding him to the right solution at the right time – the one that saves the company instead of liquidating it.

The point of expertise

This dossier illustrates a reality that many entrepreneurs are unaware of: a company in difficulty does not necessarily have to close its doors. The notice of intention to make a proposal, followed by a composition proposal, is a restructuring tool – not a liquidation tool. It enables a viable company to reorganize while remaining in business.

One of its least-known powers is the ability to terminate a commercial lease that jeopardizes the viability of the business. In Jérémy’s case, a single loss-making branch was jeopardizing seven profitable establishments. The termination of this lease, as part of the restructuring, isolated the problem and preserved everything else.

This is precisely the kind of analysis that only a licensed insolvency trustee can provide: distinguishing what is salvageable from what is not, and building a solution that saves the essentials rather than sacrificing everything.

In short – what this dossier shows

– A company in difficulty can often be restructured rather than closed;

– In particular, the notice of intent and the composition proposal make it possible to terminate a commercial lease that is undermining viability, while retaining profitable activities;

– The deposit triggers immediate legal protection, putting an end to pressure from creditors and landlords;

– Consulting early – at the first sign of trouble – widens your options and saves what can be saved.